Social Foundations of Postindustrial Economies

SOCIAL FOUNDATIONS OF POSTINDUSTRIAL ECONOMIES

This page intentionally left blank

Social Foundations of Postindustrial Economies

G0STA ESPING-ANDERSEN

OXPORD UNIVERSITY PRESS

This book has been printed digitally and produced in a standard specification in order to ensure its continuing availability

OXPORD UNIVERSITY PRESS

Great Clarendon Street, Oxford 0X2 6DP Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Bangkok Buenos Aires Cape Town Chennai Dar es Salaam Delhi Hong Kong Istanbul Karachi Kolkata Kuala Lumpur Madrid Melbourne Mexico City Mumbai Nairobi Sao Paulo Shanghai Taipei Tokyo Toronto Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York © G. Esping-Andersen 1999 The moral rights of the author have been asserted Database right Oxford University Press (maker) Reprinted 2003 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer ISBN 0-19-874201-0

ACKNOWLEDGEMENTS The material in this book has been repeatedly tested on a non-random cross-section of student populations: at the European University Institute, the University of Trento, the Juan March Foundation in Madrid, New York University, the University of Wisconsin-Madison, the Faculty of International Economics at Maastricht, and at the University of Pompeu Fabra. Chris de Neubourg, Wolf Heydebrand, and Vicente Navarro deserve thanks because their invitations to lecture on the welfare state at Maastricht, the New York University, and Pompeu Fabra respectively, helped me test the coherence of the argumentation that follows. Students are excellent cannon-fodder on the global academic battlefield. I do have some sympathy with my students at Trento when they lament that my lectures are incomprehensible. They are, of course, the front-line recipients of any new idea that comes to mind. To my students, therefore, a genuine, if collective, appreciation. Many of the papers and talks that eventually coagulated into this monograph were written in response to criticism of my earlier work, a heavy dose of which came from the feminists. What I caught from their attacks was not so much the overarching salience of gender as the analytical power that a re-examination of the family can yield. A thank you, therefore, to one more collectivity: the feminist critics. You often need a nudge from someone to bring that endless mass of papers you have been writing into a coherent book. For this I must thank Colin Crouch, who generously proposed that I put together an updated, re-thought, and revised study on comparative welfare states and publish it in his series at Oxford University Press. I must also apologize for the fact that what you see here is a far cry from what we initially agreed upon. I did indeed have an endless mass of papers to go on, but I soon discovered that they did not add up to much. No wonder, many of them were the kind of stuff that airport-academics concoct between check-in and arrival on the nth seminar journey: the same argument or the same data recycled over and over again. Those that have found their way into this book in one shape or another were the ones that took real effort. Two such were my study for the United Nations (UNRISD) 1995 Social Summit in Copenhagen, and the study for the OECD Conference on Towards 2000 in Paris, 1996. Here is my chance to acknowledge my debt to Dahram Gai, Cynthia Hewitt (both at UNRISD), and Peter Sherer (at the OECD) for the opportunity to make myself clear also to a non-academic audience.

vi

Acknowledgements

I cannot honestly claim that everything that the reader will find in this book are the fruits of my own hard labour. There are two groups whose generosity has been decisive. One helped me with data and statistical analysis. Ivano Bison at Trento, Koen Vleminckx at LIS, and Axel West Pedersen at FAFO in Oslo have been outstandingly generous. The second group helped me think more clearly on various questions. Jens Bonke and Anne-Mette Sorensen helped me think about the household economy; Gotz Rohwer, Hans Peter Blossfeld, and Karl Ulrich Mayer helped me think about the life course. Carles Boix, Colin Crouch, Ian Gough, Axel Leijonhuvud, Frances Piven, Adam Przeworski, Jill Quadragno, and Vicente Navarro all helped me with thoughtful suggestions across the entire spectrum. John Myles, as always, helped me think about what, in the first place, I was doing, and why. But there is only one person in the world to whom I really wish to dedicate this book, namely Paula Adam. G0sta Esping-Andersen Barcelona June 1998

CONTENTS List of Tables 1: Introduction PART I: VARIETIES OF WELFARE CAPITALISM

viii 1 13

2: The Democratic Class Straggle Revisited

15

3: Social Risks and Welfare States

32

4: The Household Economy

47

5: Comparative Welfare Regimes Re-examined

73

PART II: THE NEW POLITICAL ECONOMY 6: The Structural Bases of Postindustrial Employment 7: Managing Divergent Employment Dilemmas PART III: WELFARE CAPITALISM RECAST?

95 99 120 143

8: New Social Risks in Old Welfare States

145

9: Recasting Welfare Regimes for a Postindustrial Era

170

Bibliography Index

185 201

LIST OF TABLES 1.1 2.1 2.2 2.3 4.1 4.2 4.3 4.4 4.5 4A 4B 5.1 5.2 5.3 5.4 5.5

6.1 6.2 6.3 6.4 6.5 6.6

Major symptoms in the perennial welfare state crisis A comparison of labour market institutions Labour market regulations and worker job rights The waves of (a) de-ruralization, and (b) de-industrialization The impact of unpaid work and of daycare on women's employment Comparative welfare state de-familialization The intensity of family welfare provision The net post-transfer/tax cost of child care for a family with average income Women's employment levels and fertility Welfare state services to families Welfare state incentives and disincentives for working mothers Logistic odds-ratios for social assistance and private pension dominance by welfare regime Logistic regressions (odds-ratios) of universalism and private pensions, and welfare regime types Logistic regressions (odds-ratios) of welfare regimes and corporatism, etatism, and welfare state de-familialization A summary overview of regime characteristics Multinomial logit regressions. The relative odds of high levels of welfare state family support and of low levels of familycaring burdens by welfare regime and women's employment levels Employment and unemployment performance in the advanced economies Industrial and postindustrial occupation hierarchies Service growth and the professional-technical bias of job growth, 1980-1990 The distribution of occupations and the size of the outsider population The growing productivity gap. Percentage change in the ratio of service-to-manufacturing productivity, 1983-1995, for select countries The cost-disease illustrated by laundry servicing. The comparative cost of washing and ironing one man's shirt, employment, and self-service equipment, mid-1990s

2 20 22 26 60 61 63 66 68 71 72 77 81 84 85 93

100 107 108 109 112 113

List of Tables 6.7 Difference in expenditures on restaurants, hotels, and personal services by household type 6.8 Time constraints and personal-service jobs. The impact of married women's employment on job growth in services. Cochrane-Orcutt time-series estimates 7.1 Low wages, and the relative risk of unemployment among the less-skilled, youth, and women, 1990s 7.2 Explaining early retirement 7.3 The equality-jobs trade-off 7.4 Labour market protection, actual job growth, and regression-estimated hypothetical deviation from actual job growth during the 1980s 7.5 Rigidities, bargaining structure, and employment outcomes 7.6 Rigidities, bargaining structure, and the unemployment bias 7.7 Rigidities, bargaining structure, and probabilities of leaving unemployment 7.8 Regimes and employment performance 8.1 'Static'headcount indices of exclusion and inequality, early mid-1990s 8.2 Trends in employment and poverty 8.3 Transitions and entrapment 8.4 Poverty rates in traditional and new child family types 8.5 The impact of social transfers and employment on single-mother poverty 8.6 Welfare state adaptation: trends in servicing and age bias, 1980-1992 8 A Servicing and age bias of welfare states 9.1 Public and private social-protection spending, 1990

ix 116 118 127 132 133 134

136 137 139 139 156 157 158 162 165 166 169 177

This page intentionally left blank

1

Introduction We social scientists have some difficulty keeping pace with history. Most of us were bred on the notion that this has been the century of victorious pluralism, social citizenship, and welfare capitalism. Yet, we now look back with heavy nostalgia on the decades of Golden Age Capitalism when all seemed to work better. Today it seems that one after another of those constituent elements that once assured harmony and happiness are sliding into irreversible crisis and decay. Europe will herald in the new century with 15-odd million unemployed; North America, with about the same number of low-wage workers. The welfare state, arguably one of modern history's most spectacular reformist achievements, may no longer be sustainable in the kind of economic order that is unfolding. The problems that beset the welfare state are intimately connected with the malfunctioning of labour markets and families. Both function badly because they are in the throes of revolutionary change. The former is seemingly incapable of furnishing full employment and equality at the same time; the latter, once the nucleus of social integration, is now unstable and, in many countries, seemingly on a fertility strike. We are, in brief, entering a new political economy wracked with dilemmas and tradeoffs. Postindustrial society may hold the promise of many wonders, but equality is probably not among them. Hence our growing nostalgia for the Golden Age. Still, how golden was it really? True, we can probably not expect the dizzying growth rates of the past to resurface, but we are none the less much richer today. Since the first OPEC oil crisis, the OECD countries have, on average, added 50 per cent to real per capita GDP; since 1960, a full 84 per cent. True, most advanced nations suffer from chronic mass unemployment, yet we should not forget that this occurs on the backdrop of much higher participation rates than in the past. Unlike before, we must now include women in a nation's full employment promise. And if we date the Golden Age to the 1950s and 1960s, that was surely not an epoch of mature welfare states and generous social rights. Most nations had yet to achieve anything close to universal coverage, benefit adequacy, or the levels of employment protection that today are taken for granted.

2

Introduction

More than anything else it is the crisis of the welfare state which symbolizes the contemporary malaise. But, as Hugh Heclo (1981) once remarked, it would appear that the welfare state was destined to be in crisis from day one. Table 1.1 illustrates the long sequence of welfare state crises. TABLE 1.1. Major symptoms in the perennial welfare state crisis 1950s

1960s

1970s-80s

Creates inflation Harms growth

Fails to produce equality Too bureaucratic

Stagflation Unemployment Post-materialism Government overload

1990s Globalization Unemployment Rigidities Inequalities, social exclusion Family instability

Source: Esping- Andersen (19976).

Table 1.1 may be overly schematic, but it suffices to impart a few basic lessons. Firstly, even if the welfare state is doomed to a life of endless crises, at least the maladies always change. In the 1950s, the attack came from the right and from economists worried that rapid public sector growth would stifle the market. A decade later, the pendulum shifted to the left which saw lingering inequalities everywhere notwithstanding that, by the 1960s, the welfare state edifice was declared completed. By the late 1970s and early 1980s we arrive at the third crisis, this time meriting an international high-level conference (OECD, 1981), from which I have synthesized the principal symptoms. Unemployment emerges for the first time as a major welfare state failure, there was widespread fear that governments were being overloaded with demands and responsibilities, that society had become ungovernable. The new social movements, preoccupied with cultural value changes, saw the welfare state as fossilized, incapable of adapting itself to true needs. The present crisis stands out for being rather less partisan, but also more comprehensive and, once again, it merited an international conference (OECD, 1997a). The second lesson is that all earlier crises dissipated with time. The promised collapse of growth in the 1950s turned into a spectacular economic boom—all the while that public spending grew. From the 1960s to the 1970s, welfare states everywhere undertook major steps to assure benefit adequacy and reduce inequalities. Indeed, and this is a vital point to stress, this—and not the 1950s—was the true period of welfare state consolidation. This was the era of affirmative action, of anti-poverty pro-

Introduction

3

grammes, of across-the-board benefit upgrading, and, generally, of cementing the rights of social citizenship. The response to the egalitarian assault was truly massive. In fact, it was precisely this which triggered the third crisis. From 1960 to the mid-1970s, total public expenditure (as a percentage of GDP) jumped on average 30 per cent, almost exclusively due to social spending growth.1 True, 'government overload' (as well as unemployment) may not have disappeared since the early 1980s, but its meaning and implications have changed. For one, social expenditures have almost everywhere been stagnant since the 1980s. This contradicts the then popular thesis that citizens' appetite for benefits, and politician's craving for office, are insatiable and that government growth is accordingly unstoppable. Moreover, the main issue that worries today's critics is less 'overload' and more 'rigidities'. The third lesson is that the contemporary crisis differs notably from its forebears. Until now, the crisis was invariably endogenous to the welfare state—it was doing things badly or bringing about unwelcome consequences. The present crisis is, in contrast, essentially a manifestation of exogenous shocks that put into question the longer-term viability of the welfare state. The new global economy, it is said, undercuts polities' discretionary use of fiscal and monetary policy, necessitates greater employment and wage flexibility, and especially the less skilled will be condemned to unemployment unless wages and social benefits are reduced. The ageing of populations means that our commitments to social security must be rethought. Family instability implies, on the one hand, that households' traditional caring capacities are eroding and, on the other hand, that poverty risks are mounting—all the while that families are asked to absorb the new risks that come from labour markets. Above all, such exogenous shocks combine to create painful policy dilemmas: if, as in most of Europe, welfare states are committed to uphold existing standards of equality and social justice, the price is mass unemployment; to reduce unemployment, Europe appears compelled to embrace American-style deregulation. This will inevitably bring about more poverty and more inequality. In the contemporary diagnosis, rigidities appear as a sole, but none the less severe, 'endogenous' symptom of crisis. Basically, the welfare state produces too much protection where flexibility is needed, too much equality where differentiation is the order of the day. The various symptoms in the novel welfare state crisis may, or may not, be grounded in solid empirical fact. In any case, they are often poorly specified. Demographic ageing is primarily an issue of low fertility, and it is therefore this that we must analyse. The growing risks of poverty and 1 Here, and above, the growth rates are calculated from OECD, Historical Statistics, various issues.

4

Introduction

social exclusion are not necessarily inherent and inevitable features of our society. They spring from two 'malfunctioning' institutions: the labour market and the family. AIMS OF THIS BOOK This book is an attempt to come to grips with the 'new political economy' that is emerging. For lack of a better term, I refer to it as the postindustrial economy. One premiss of my analyses is that 'postindustrial' transformation is institutionally path-dependent. This means that existing institutional arrangements heavily determine, maybe even overdetermine, national trajectories. More concretely, the divergent kinds of welfare regimes that nations built over the post-war decades, have a lasting and overpowering effect on which kind of adaptation strategies can and will be pursued. Hence, we see various kinds of postindustrial society unfolding before our eyes. Welfare states responded quite energetically, although far from uniformly, to past crises. This is certainly also happening today. There is a crucial addendum to make to this general proposition: the decisive period in which the basic components of post-war welfare regimes were put in place, when welfare capitalism was institutionalized so to speak, was not the post-war decades but during the 1960s and 1970s. This was when strong worker protection and labour market regulation emerged, when social citizenship was fully affirmed. And this was when the core features of welfare states crystallized. The essential differences between the Nordic, social democratic, the Continental European, and the Anglo-Saxon liberal welfare states were affirmed in these years. This said, we hardly need historians to remind us that the timing was auspicious: the consolidation and maturation of post-war welfare capitalism coincided with the onset of the new, post-OPEC economic realities of slow growth and rising structural unemployment. It also coincided with accelerating economic globalization and family instability. No wonder that many interpret this historical coincidence as a one-way causality: exaggerated welfare statism is what catapults Eurosclerosis, poor economic performance, mass unemployment, and, indeed, rising poverty (Giersch, 1985; Lindbeck, 1992; Murray, 1984). The book pursues a set of interlinked arguments. The first addresses the so-called welfare state crisis. Contemporary debate has been far too focused on the state. The real crisis, if there is any, lies in the interaction between the composite parts that, in unison, form contemporary welfare 'regimes': labour markets, the family, and, as a third partner, the welfare state. We should not forget that the sum-total of societal welfare derives

Introduction

5

from how inputs from these three institutions are combined. Some regimes, in particular the liberal, Anglo-Saxon, are market-biased; others, especially the Southern European or the Japanese, are powerfully familialistic. And still others put the accent on state delivery of welfare. This way of defining the problem implies that what most commentators see as a welfare state crisis, may in reality be a crisis of the broader institutional framework that has come to regulate our political economies. The second line of argument is that the 'real' crisis of contemporary welfare regimes lies in the disjuncture between the existing institutional construction and exogenous change. Contemporary welfare states and labour market regulations have their origins in, and mirror, a society that no longer obtains: an economy dominated by industrial production with strong demand for low-skilled workers; a relatively homogenous and undifferentiated, predominantly male, labour force (the standard production worker); stable families with high fertility; and a female population primarily devoted to housewifery. Welfare regimes are built around a set of egalitarian ideals and risk profiles that predominated when our parents and grandparents were young. If we wish to understand the travails of welfare regimes today, we must begin with the recognition that the risk structure is changing dramatically. The third line of argument is a follow-up on the second: the emerging risks of postindustrial society come primarily from the revolution that is unfolding in both labour markets and households. We sorely need a better conception of what, today, drives family behaviour and service employment. According to most analyses, the driving force is of the macroscopic, global kind. This is certainly one part of the story, but there is also a potent microscopic force at play, namely families' and, in particular, women's economic decisions. I agree that the new political economy presents trade-offs that make it exceedingly difficult to harmonize some egalitarian goals with a return to full employment. Existing welfare regimes tend to be captive in their own institutional logic and, hence, the ways in which they respond to and manage emerging dilemmas will yield different outcomes and produce varying 'postindustrial' scenarios. Our common tendency to regard postindustrial society as a largely convergent global process impairs our analytical faculties tremendously. Besides the well-known juxtaposition of nations which create jobs through deregulation, and those which create mass unemployment through strong social protection, emerges adjunct dilemmas. One such is a potential 'low-fertility equilibrium' trap that springs from the incapability of women to harmonize careers and family obligations. Low fertility is, of course, a major reason for why welfare states may not be sustainable. Another is the 'low-wage, low-skill equilibrium' that easily accompanies deregulation.

6

Introduction

Behind these lines of analysis lurks my key hypothesis, namely that the household economy is alpha and omega to any resolution of the main postindustrial dilemmas, perhaps the single most important 'social foundation' of postindustrial economies. To proceed, we need to tackle a number of problems. We have to reexamine social risks and the welfare state; the family as welfare consumer and producer; the functioning of labour markets and what drives service employment. We are operating on slippery territory because we are examining the passage from one well-known social order—let us call it welfare capitalism—to another—let us call it postindustrial society—the contours of which are still unfolding. One method of dealing with this problem is to hold the parameters of change up against well-known historical constants. The book therefore begins with 'the past', a re-examination of welfare capitalism; the era of what Lipset (1960) called the democratic class struggle. There are four phenomena which, together, form the unifying theme of this book: equality, risks, jobs, and the 'new political economy'. 'Risks' and 'jobs' will be dealt with in separate chapters. Here I shall limit myself to some brief remarks on 'equality' and the 'new political economy'. THE PROBLEM OF EQUALITY The concepts of equality and welfare state have become almost synonymous, and both have become shorthand for post-war welfare capitalism. If postindustrial society is driven by a trade-off between equality and other goals, it would seem necessary to understand better just exactly which kind of equality is involved. If we must sacrifice equality, what kind? There exist few concepts with such variegated meanings as equality. It can denote fairness and justice (that is, issues of equity), the distribution of opportunities, resources, and capabilities (which address equality of life chances), the allocation of rewards and the differentiation of living conditions (a more static, 'here and now' equality), or permanent social cleavages (a question of class formation). Equality is also invoked when, for example, social reformers or trade union organizers call for universalism and solidarity—issues of equality or rights and duties.2 In the broadest meaning possible, equality is the major 'leitmotif of social science. In economics, the stress is on the distribution (and utilization) of scarce resources; in political science more on power; and in soci2 Equity and equality are often used indiscriminately. Given their more individualistic view of the economic world, it is hardly surprising that economists tend to imply equity when they use the word equality. For a recent example by a sophisticated thinker on this subject, see Le Grand (1991). For an overview of the meanings and implications of egalitarian concepts (and an appeal to study equality in terms of capabilities), see especially Sen (1992).

Introduction

7

ology on social stratification. Issues of equality are contentious and for this reason Gunnar Myrdal's (1954) old warning about the value premisses of social scientists cannot be easily ignored. Social science parallels politics with its perennial battle between anti- and pro-egalitarians. Yet, such labels are not especially informative when we consider the multifaceted character of the concept. Certainly, the pros or the cons rarely agree on what kind of equality should be optimized or done away with. The substantive meaning of equality or inequality is powerfully bound by nation and epoch. Not only are some societies or cultures more intolerant of inequities or social differentiation, but what is implied by equality or fairness may differ qualitatively. In a recent study, Svallfors (1998) shows that popular assessment of what is a just income ratio between top and bottom hovers around 4-to-l in Scandinavia compared to 12-to-l in the United States. Korpi (1980a) once showed how differently Americans and Scandinavians view poverty: Americans will see the poor in categorical terms, as a distinct substratum ('the losers'); to a Scandinavian, poverty is a question of how unequally resources are distributed. And ever since Marx and Sombart it has been repeatedly observed that Americans see equality in terms of individual meritocracy (or in terms of levelling living standards) while Europeans are more likely to think in class terms (Lipset, 1991). The meaning of equality changes across historical epochs. In the first part of the twentieth century, the problem of equality was, consciously or unconsciously, explicitly or implicitly, an echo of the Marxist question of class. The governing strata were preoccupied with the Arbeiterfrage" or the 'Soziale Frage' (in Germany), 'la question sociale' (in France), and, in Britain, Disraeli spoke of the 'Two Nations'. The socialists, in turn, used the language of class struggle and, when less Marxist, spoke of social emmiseration. The post-war embrace of Keynesianism and the welfare state appeared to have resolved the 'social question' once and for all and, hence, equality became more individualized, a matter of mobility chances. Welfare capitalism became the reigning political economy in the advanced economies over the past half century. It would probably be futile to search for a precise definition of this concept considering that it basically serves to capture the Zeitgeist of an era.3 Regardless, it signals the arrival of four constituent institutional innovations in the history of capitalism. The first and foremost was the welfare state with its promise of universal social citizenship, of a new social solidarity. The notion of a welfare state points immediately to the second, namely full democracy. In its 3

The notion of 'welfare capitalism' actually dates back to the 1920s when the American Right sought to deflect the demand for European-style social insurance by encouraging voluntary, company-based welfare plans.

8

Introduction

English usage, the welfare state was coined by the Archbishop of York during World War Two as a programmatic antidote to the Nazi warfare state (Briggs, 1961). Nowhere did the democratic content of welfare states find stronger expression than in T. H. Marshall's (1950) assertion that civil and political rights are only democratically meaningful if complemented with social rights. In other words, democracy and the welfare state are sewn from the same fabric. The full recognition and consolidation of trade unionism and what we today call modern industrial relations systems was the third pillar of welfare capitalism, not only because this regularized labour market conflict, introduced an element of employment rights and job protection, or nurtured a more consensual approach to bargaining, but also because it introduced a modicum of democracy 'behind the factory gates', as Swedish socialists used to say. Finally, welfare capitalism would have been incomplete were it not for the fourth pillar, the rights to education and the expansion of modern mass education systems. Thus was born a new egalitarian agenda. By the 1950s, the 'social question' had vanished from the political vocabulary, and the working class question no longer impassioned politics. American society had become 'middle class', and Europe discovered the 'affluent worker' (Zweig, 1971). The issue of equality was reformulated because, it seemed, class differences had ceased to be of importance. It was this which Lipset (1960) sought to describe with his notion of the 'democratic class struggle'. The four pillars of welfare capitalism appeared to guarantee that achievement and merit would reign supreme. The recast egalitarian agenda presents a wholly new mix of collectivism and individualism. On one side, social citizenship prevails over old class solidarities. On the other side, the raw laissez-faire call for individual selfreliance was pushed aside and liberals linked arms with social democrats in a battle for equal opportunity. In effect, welfare capitalism was often a synthesis of liberal and social democratic egalitarianism. This synthesis took variegated forms, not only because the liberal ethos was stronger in some nations (especially in the Anglo-Saxon world), and the social democratic stronger in others (Scandinavia especially). But also because in many countries, like Japan and much of Continental Europe, both liberalism and socialism were decidedly peripheral compared to their conservative competitors, whether they were etatiste, corporativist, or guided by Confucian or social Catholic teachings. Whereas the new politics of equality assumed a strong individualistic form in Scandinavia and in the Anglo-Saxon nations, this was not so in East Asia or much of Continental Europe where the unit of social protection, of social rights, and of redistributive attention, was more likely an economic status group ('corporation') or the family (via the male bread-winner).

Introduction

9

At century's end, the epoch of welfare capitalism as we know it is in decline. Its constituent elements seem all in crisis, unable to adequately address emerging needs and problems. We find that longstanding norms and practices are losing their carrying power, that conventional formulae seem not to work. If the literature has diagnosed the situation correctly, we appear to face concomitant welfare state, labour market, training, and family 'failure'.4 Post-war social science built a powerful conceptual and theoretical apparatus to help us understand the workings of welfare capitalism. It is, however, ill-equipped to deal with the kind of world that is now unfolding. Take unemployment, which used to be a fairly straightforward concept. To most it meant that a person (usually a male) was temporarily out of a job because of frictional or cyclical adjustments. What does it mean today? Is housewifery, early retirement, or, for that matter, prolonged education unemployment in disguise? And Richard Freeman (1996) is not joking when he claims that incarcerated American males are the functional equivalent of the long-term unemployed in Europe. Or take productivity. Fred Block (1990) suggests that we may be caught in a kind of neophysiocratism: we have no difficulty recognizing the productive contribution of metal workers, but what about caring for someone else's children? The value-added of public employment is routinely measured as equal to the cost of the input. Many feminists insist that unpaid domestic labour is a productive contribution to aggregate welfare. Some argue that working mothers' true productivity is negative when we count in the costs of leave schemes and daycare (Rosen, 1996). The concept of equality finds itself in a similar conundrum. In the first post-war decades, education was widely considered the panacea of equality of opportunity. The egalitarian critique of welfare states in the 1960s was in large measure based on the realization that social equality requires more than the expansion of mass education. Hence, both scholarly and political debate began to re-theorize equality, now stressing the importance of cultural and social capital, and the unequal distribution of resources. More importantly, the politics of egalitarianism changed: some welfare states began to promote a more aggressive assault on income and resource differences (equality here-and-now) and/or on life chance equalization (affirmative action, sponsored mobility, or quotas). The upshot, as we see today, is that welfare states find themselves barraged from two sides at once. One side protests that redistributive, hereand-now equality has progressed too little, that some groups have been left behind; another side sees that exaggerated commitments to equalize everything has produced nothing but inequity and inefficiency. Most 4

For an overview, see Esping-Andersen (19976).

10

Introduction

writers on the welfare state underestimate the inherent tension between equity and equality. Welfare states today face multiple egalitarian tensions. On one side, there is the problem of how to balance equality and equity; on the other side, how to combine egalitarianism with full employment. In both cases, one of the two may have to give. Yet, we have no yardstick, no oracle, that could help us decide how much, or what kind of, equality must be sacrificed—if any. And we lack any coherent formula for how to manage the consequences of whatever decision we make. We all know that globalization, the new service economy, or the new demography threaten received notions of equality, but do we have any formula for rewriting the egalitarian agenda? Can we conceive of a new social contract that would befit a 'postindustrial' society? Some of the losers in contemporary society are easily discernible. The less skilled, youth, and single-parent families are becoming high-risk groups almost everywhere. But one thing is momentary under-privilege, another life-long entrapment. There are signs that some losers are forming into long-term socially excluded strata. Europe is ripe with popularly coined new social classes: the 'A-team' and 'B-team' in Denmark, the 'two-thirds society' in Germany, the 'two-speed society' in France, the new 'underclass' in Britain and the United States. What most members of the various Bteams have in common is that they had much less to fear a few decades ago. The design of contemporary welfare states reflects a risk structure that is closer to that of our fathers and grandfathers than of young families today. In this nexus, the welfare state is embattled from three sides at once. There are those who oppose any change whatsoever, citing the inviolability of achieved rights. There are those who wish to rescue the welfare state by altering it so that it may, once again, address real needs and risks and perhaps even give a new push to economic efficiency. And, as a powerful third force, there are those who insist that the only way to guarantee a future 'good society' is to dismantle the welfare state. POLITICAL ECONOMIES Robert Merton once observed that contemporary social scientists may see more clearly because they stand on the shoulders of giants. My favoured giants tend to be political economists. Yet, how far I shall be able to see, what I shall see, and how I eventually interpret that which I manage to see, all depends on my choice of giant. Political economy has very different meanings. By political economy, some mean public, or rational choice, theory. This is truthfully more a (often powerful) methodological than theoretical

Introduction

11

approach. Indeed, public choice is an analytical preference that ranges from quite conservative scholars such as Tullock and Buchanan, to writers with a Marxist intellectual inspiration such as Adam Przeworski. Political economy can also be shorthand for what is being studied—the interplay of public and private, state and market. The mix of politics and economy often generates disciplinary colonization. To economists, political economy often means the application of economic theory to political phenomena; to political scientists, vice versa. It can, however, also imply a particular theoretical framework for analysing society. The starting point here is to offer an alternative to the supposedly disembodied treatment of economic life typical of mainstream economics. The market, to a political economist, is neither sovereign nor natural, but a construction suspended between collective force and social institutions. As theoretical approach, political economy is a medley of traditions. One derives from Marxism and sees politics and power in class terms, the economy as a fount of contradictions, exploitation and, hence, of collective conflict. In this tradition the welfare state takes on two forms: to some it is a (problematic) instrument of social legitimation, as in O'Connor (1973) and Offe (1972); to others it is a (possibly contradictory) democratic implant in a capitalist body, as in Gough (1979) and in the writings of many radical economists. A second follows the lead of European institutional thought. The echoes of Joseph Schumpeter, Max Weber, and Karl Polanyi are particularly strong. It often shares with Marxism a keen eye for issues such as power, inequalities, and conflict but does not automatically assume that 'class struggle' is the motor of change or that capitalist institutions, per definition, are repressive. Indeed, its great analytical asset lies in its sensitivity to historical transformation and cross-national variation. With one huge reservation, this is the guiding perspective of the present book. My reservation has to do with the blindness of virtually all comparative political economy to the world of families. It is, and always has been, inordinately macro-oriented. It occupies itself with macroscopic constructions, such as welfare states, world trade, international finance, or trade unions, and with similarly huge outcomes, such as inflation, employment, inequality, or growth. A major belief that underpins this book is that a sound understanding of postindustrial society must be anchored in the household economy.

12

Introduction THE THREE WORLDS OF WELFARE CAPITALISM REVISITED

Most social scientists, like the societies they study, are hard put escaping from their own path dependencies. I am certainly no exception. It is therefore inevitable that this work flows from earlier. Indeed, the present project began as an attempt to revisit The Three Worlds of Welfare Capitalism (Esping-Andersen, 1990) in light of numerous criticisms. Also that book was an exercise in political economy, defining welfare regimes in terms of the mix of public and market provision and, subsequently, explaining international variations in terms of state traditions and dominant patterns of power mobilization. Labelling the three principal welfare regimes as 'social democratic' (basically the Nordic countries), 'conservative' (Continental Europe), and 'liberal' (the Anglo-Saxon nations) served to identify their roots as well as their character. Two among many criticisms stand out because, if unresolved, further analytical progress will be hampered. The first is principally a classificatory critique (are there more than, simply, three models?). I shall address this issue, but not exhaustively. The second has to do with my failure to recognize gender differences and, more generally, with my severely underdeveloped analysis of the family. This critique shall receive considerable more attention, first of all because it is a sorely needed reminder that the household is a core component of any welfare regime. It is evident that the Mediterranean (and Japanese) welfare model is powerfully familialistic, a feature which, as we shall see, has immense consequences for both welfare and employment. For decades, the family—both as social institution and as decisionmaker—was largely assumed away. As the notion of a 'second demographic revolution' indicates, and as all statistics demonstrate, the changing role of women and evolving new household forms are an intrinsic—possibly leading—part of the socio-economic transformation around us. Our grandfathers were male bread-winners; our grandmothers most likely housewives. Very few children today grow up in this kind of family. Household forms are being revolutionized even if some welfare states do not seem fully aware of it.

PART I VARIETIES OF WELFARE CAPITALISM

Why do we now think of post-war welfare capitalism as such a successful social order? Basically because it succeeded in unifying social citizenship, full employment, mass education, and well-functioning industrial relations systems. This institutional configuration proved itself capable of absorbing huge masses of de-ruralized workers while, simultaneously, raising real earnings and living conditions for the vast majority of people. The same cannot be said for today as de-industrialization and the service economy seem to generate mass unemployment and stagnant earnings. What has happened? How can we account for this historical turnabout? All epochs have their catchwords, their peculiar leitmotif, that help us grasp the essence of the world around us. Post-war welfare capitalism was the era of'pluralism', of the 'end-of-ideology' (Bell, 1960), of the 'waning of oppositions' (Kirscheimer, 1957), and of the 'affluent worker' (Zweig, 1971). Lipset's (1960) notion of the 'democratic class struggle' managed perhaps better than any other to invoke the spirit of the times. That spirit was a hopeful one, primarily because it juxtaposed a problematic past. The pathologies of totalitarianism and extremism had been cured, class differences had faded. Welfare capitalism had put an end to the old 'Arbeiterfrage'. Pluralist theory is now less persuasive. Instead of a middle-mass of affluent workers, new extremisms raise their heads and we seem to be reverting back to the kind of social polarization that we so successfully escaped. Few continue to believe in a harmony of egalitarianism, growth, and full employment; a social-democratic 'third way' appears no longer possible. Instead, we seem to be entering a world where one goal must be sacrificed for another: if we desire full employment, we must scale back social citizenship and job rights. If we wish to restore full employment, we may have to accept levels of inequality that neither pluralist theory nor welfare state ideology would have found acceptable. The contemporary pessimists, like the post-war optimists, often see the world governed by overpowering universal forces. To the pluralists,

14

Varieties of Welfare Capitalism

modernization, 'the logic of industrialism', the nuclear family, and a triumphant middle-class society were inescapable universals. Their modern-day equivalents are unstoppable globalization and the great 'equality-or-jobs' trade-off. Universalizing theory is powerful when it captures the empirical essence of an epoch. Pluralism was powerful because there was an undeniable decline of ideological and social polarity in post-war welfare capitalism— certainly when compared to the pre-war era. The contemporary 'great trade-off appears equally compelling because inequality, marginalization, and mass unemployment have become defining characteristics of our present epoch. Yet, universals often appear less valid when put to the test of comparative empirical analysis. In the subsequent two chapters, I revisit the political economy within which post-war welfare regimes emerged, matured and, now, appear crisisridden. The 'Golden Age' could certainly not have come about had it not been for the rise of welfare states. What has been less recognized in the literature is that the modus operandi of labour markets and the structure of families were equally detrimental forces.

2

The Democratic Class Struggle Revisited Lipset's (1960) 'democratic class struggle' depicts a society where consensual bargaining has replaced naked class war, where meritocracy and equal life chances prevail over inherited privilege and ascription. This was a credible imagery because inequalities did in fact decline and material betterment was in fact quite universal. Mass consumption, growth, and modest unemployment brought middle-class living standards to workers and, to their offspring, a sense of upward mobility into white-collar jobs. We habitually believe that it was Keynesianism and the welfare state that rendered the 'democratic class struggle' possible. However, with the aid of hindsight we can see that this was only one side of the coin. The other side was that families were stable and the economy dynamic. Even low-skilled workers could count on well-paid and secure jobs and real wages grew year after year. The new society appeared middle class because the kind of income security that was once a privilege of the few was now enjoyed by most; the average working-class family could now aspire to home ownership, household goods, and full-time housewifery—all symbols of the comfortable middle-class life. Full employment growth nurtured strong trade unions and, in their wake, worker protection and diminished pay inequalities. The importance of the welfare state during the immediate post-war decades lay not so much in its effects on employment and redistribution as in its capacity to lessen economic insecurity during peoples' inactive years. Until the 1970s most social security systems were, in reality, still quite rudimentary in terms of the range of social risks covered, the population included, or the level of income replacement. Even in the vanguard Nordic welfare states, the principle of guaranteed full income replacement emerged only in the mid-1960s. Similarly, the attainment of full employment was not necessarily the result of Keynesianism. Full employment arrived in avowedly Keynesian regimes, like Sweden, but also in staunchly 'monetarist', anti-Keynesian polities, like Germany. And in some nations, like Italy and the United States, de facto full employment never really arrived. Besides, the massive employment-generating effect of welfare state expansion in education, health, and social services occurred—once again—from the mid-1960s onward.

16

Varieties of Welfare Capitalism

In any case, more equality and jobs did not abolish social class once and for all. Factory workers were still factory workers, regardless of pension rights and homeownership. What had happened, according to Lipset, was that the conflict-producing correlates of class had disappeared. With lifetime job security, high pay, and welfare guarantees, Seebohm Rowntree's notion of a distinct 'working-class life cycle of poverty' seemed now a relic of the distant past. Class differences appeared to narrow also because each new generation received more education, attained middle-class jobs, and earned more than did its parents (Levy, 1988). Europe's 'affluent worker' and America's 'middle class' were the same phenomenon (Myles and Turegun, 1994). The 1950s and 1960s were the years of the 'great compression', as Goldin and Margo (1991) call it. For the average manufacturing worker in general, and for the unskilled worker in particular, the world was undoubtedly a much better place to live. Still, the 'class-correlates' did not erode similarly across all advanced nations, and this is where differences in welfare state and industrial relations construction matter. VARIETIES OF THE DEMOCRATIC CLASS STRUGGLE In an important reappraisal of Lipset's thesis, Korpi (1983) argues that distributional outcomes depend on wage-earner unity and power mobilization. His balance-of-class power argument does in fact help explain broad variations in post-war labour market performance. Where trade unionism was less centralized and coverage limited, as in the United States, the result was more segmentation, dualism and, hence, inequality. When also the welfare state is residual and social protection highly privatized—again as in the United States—market inequalities are unlikely to be affected much by social redistribution. In contrast, market distribution is likely to be more egalitarian where trade unionism is centralized and coverage comprehensive as in much of Europe, but especially in Scandinavia. This is particularly the case in centralized, economy-wide, and co-ordinated bargaining systems which, as a vast literature has shown, constitute the best possible institutional infrastructure for harmonizing wage-equalization, full employment, and growth. "• Clearly, where also the welfare state is strongly universalistic, the distribution of resources and life chances should be additionally egalitar1 Highly co-ordinated bargaining means that unions must represent the universal, rather than narrower group interests. Potentially inflationary rent-seeking bargaining is thus kept to a minimum, unions are better capable of guaranteeing wage discipline, and the result should be fewer externalities. The evidence in favour of the beneficial effects of encompassing interest organizations and highly co-ordinated industrial relations is massive (Garret and Lange, 1986; Calmfors and Driffill, 1988; Hicks, 1988; Soskice, 1990; 1994). For an overview, see Esping-Andersen (1994).

The Democratic Class Struggle Revisited

17

ian, creating homogeneity not only within the working class, but also between the social classes.2 Hence, the new 'affluent worker' probably became a more universal phenomenon in Europe. For these very same reasons, post-war European politics remained more solidly anchored in class organizations than pluralist theory allowed for. Where social democracy and trade unionism was especially powerful there emerged encompassing systems of 'social partnership', of class and interest representation within a framework of tripartite consultation and interest inter-mediation.3 Hence, the 'great' social classes, rather than disappearing, became institutionalized agents of collective action. Many nations, of course, developed neither nationally co-ordinated and centralized, nor decentralized, collective bargaining. Yet, they were hardly pluralist in the American sense. Instead, they were dirigiste, as in France, pillared polities, as in the Netherlands, clientelist, as in Italy, or corporatistic dictatorships, as in pre-1975 Portugal and Spain. The real world of pluralism was in fact rather small. The welfare state combines with industrial relations to form the principal institutional infrastructure for labour market behaviour. Indeed, there exists a very close connection between systems of interest representation and welfare state construction. Comprehensive, universalistic welfare states almost invariably go hand-in-hand with centralized, nation-wide and co-ordinated bargaining (Denmark, Norway, Finland, and Sweden); residual welfare states, with decentralized and weak unionism (the United States, Canada, and now also the UK). Welfare state construction has profound, mainly indirect, effects on labour market outcomes. The liberal, Anglo-Saxon welfare state emphasis on targeted meanstesting for the poor and private occupational plans for core workers will reinforce rather than mute market-based stratification. Core, unionized workers typically combine modest-level public entitlements with a fairly extensive package of private benefits and rights. The relative size of the 'core' is obviously of great importance in terms of the net stratificational outcome. This is precisely Castles' point when he insists on a sharp distinction between American welfare state residualism and the implicit universalism within the Australian 'wage-earners' welfare state (Castles, 1996; Castles and Mitchell, 1993). In the United States, employee coverage under company welfare programmes was about 50 per cent for pensions and 70 per cent for health care at the height of occupational benefit 2

This has been widely documented in stratification, poverty, and income distribution research (Erikson and Aberg, 1985; Palmer, 1988; Mitchell, 1991; Smeeding et al, 1990). Comparative data also point to a considerably greater degree of inter-class equality in Scandinavia compared to the rest of Europe, mainly due to Scandinavia's much more universalistic and egalitarian welfare states (Mitchell, op.cit). 3 For an overview, see Goldthorpe (1984), Streeck (1992), and Regini (1992).

18

Varieties of Welfare Capitalism

expansion in the 1970s (Bureau of Labor Statistics, 1987). At the other extreme, the most vulnerable will find themselves locked into a combination of low public benefits and few, if any, private entitlements. In contrast, Canadian workers came to enjoy universal health care, and Australians a de facto universal system of occupational welfare (Castles, 1996). Continental Europe's status divided social insurance systems influence labour market stratification very differently. The narrower communities of social citizenship create more pronounced differentials according to occupational status. Also, the strong link between benefits and employment record creates a stronger gender-segmentation with profound secondary effects. Since entitlements assume stable, uninterrupted careers, the labour market becomes constructed around the male bread-winner, while wives and family members will depend on derived rather than personal social rights. Family welfare, in other words, depends on the bread-winner. This kind of system is bound to produce generous rights, heavy labour costs, and pervasive job protection for the core worker. The second-order consequence is heavy hiring and firing costs and, hence, barriers to entry. Hence, familialistic, social insurance-based social policy regimes are likely to produce a divide between labour market insiders and outsiders. Yet another configuration emerges in the comprehensive Scandinavian welfare states. The accent on universal benefits and services creates a more homogenous population in terms of the distribution of social resources. Its stress on individual rights and, even more importantly, on promoting women's employment (since the 1960s) has de facto replaced the conventional male bread-winner model with the double-earner, dual-career family. And the massive apparatus of collective social services has created an essentially female, occupational hierarchy in the welfare state. Hence, probably nowhere else are women and the welfare state so dominant in the evolution of the postindustrial economy—with the unintended side-effect of unusually strong job sex-segregation. The consolidation of these divergent welfare capitalisms occurred at the very same moment when the political economy changed, when full employment industrialism was replaced by the twin process of deindustrialization and tertiarization. Industrial workforce redundancies, women's employment growth, and service sector development do not merely follow universal laws of motion. Rather, postindustrial society is being created by an antecedent institutional infrastructure. In this chapter, I shall focus on the labour market components of this infrastructure: the nature and strength of trade unionism, and variations in labour market regulation.

The Democratic Class Struggle Revisited

19

Models of Industrial Relations Table 2.1 summarizes the main cross-national differences in industrial relations structure in terms of the scope of bargaining coverage, centralization, and degree of co-ordination.4 Coverage rates are usually a function of degree of co-ordination and centralization in collective bargaining. The greater the coverage, co-ordination, and centralization level, the more likely is it also that bargaining will produce more homogeneous, acrossthe-board egalitarianism in terms of wages and conditions. Vice versa, very decentralized structures with only marginal levels of coverage—as in North America and the United Kingdom—are apt to result in greater differentials and segmentation. We can note a certain degree of decentralization in the past decades, most clearly in Denmark, Sweden, and the UK. We know from collective action theory (Olson, 1982) that the degree of co-ordination affects outcomes. Little or no co-ordination means that individual unions are more likely to pursue egoistic, rent-seeking, 'insider' wage bargaining while highly co-ordinated bargaining is more likely to harmonize general wage developments with economy-wide constraints (Alvarez, Garret, and Lange, 1991; Bruno and Sachs, 1985; Crouch, 1985; Calmfors and Drifflll, 1988; Soskice, 1990). The relationship between collective bargaining and labour market performance is often depicted as a 'hump-shaped' curve. In this view, desirable collective goals, such as price stability and low unemployment are more likely to result if unionism is either very weak (hence market forces will predominate) or very strong (consensual solidarity will predominate). The worst-case scenario occurs where unions have muscle but no capacity for co-ordination (Calmfors and Driffill, 1988; Soskice, 1990; OECD, 19976). The gains from co-ordination should also extend to economies' capacity to minimize equality-jobs trade-offs. Thus centralization and coordination seem better able to sustain wage equality or strong worker rights without adverse employment or inflationary effects, primarily because of unions' capacity for across-the-board wage restraint (OECD, 19976, Tables 3.5 and 3.6).5 Contrary to what is often believed, there is no uniform trend towards trade union decline. Our data do not permit long-term comparisons but, according to Visser (1996, Table 2), coverage rates have remained fairly stable in all countries except the United States and Britain. There is, 4

We should focus on union coverage rather than actual membership since it is the former that really matters from the point of view of bargaining results. Union density figures may seriously misrepresent a nation's collective bargaining practice, as is most dramatically evident in France where union membership is insignificant (10 per cent of the labour force) while coverage under collective contracts is over 80 per cent (OECD, 1994a, ii, 10). 5 These issues will be examined more closely in Part II of this book.

Varieties of Welfare Capitalism

20

TABLE 2.1. A comparison of labour market institutions Union coverage

Centralization

Co-ordination

1990s

1970

1990s

1980s

Australia Canada UK USA

80 35 47 15

Medium Low Medium Low

High Low Low Low

High Nil Nil Nil

Denmark Finland Norway Sweden

80+ 95 75 83

High High High High

Medium High High Medium

Some Some High Some

Austria Belgium France Germany Italy Netherlands Portugal Spain

98 90 82 90 70 81 79 70+

High Medium Medium Medium Medium Medium Medium Medium

Medium High Medium Medium Medium Medium Medium Medium

High Some Some High Some Some Some Some

Notes: Coverage is the percentage wage-earners de facto covered under collective agreements; centralization reflects dominant locus of bargaining: company, sector, or economy-wide level; co-ordination implies synchronization of bargaining across individual unions. Sources: Visser, 1996, Table 2; and OECD, 1994a, Part II, Tables 5.9 and 5.14. Data on Italy based on personal communication with M. Regini.

however, a notable fall in centralization and co-ordination within those nations that once were considered the epitome of neo-corporatism: Austria and Scandinavia. The coherence of employer organizations may also be detrimental to collective bargaining. Swenson (1989) argues that trade union attributes are basically a derivative of employer organization. In fact, the crossnational rank-order of employer organizational density or cohesion is almost identical to that of trade union density and centralization: very low in Britain on both counts; high or medium-high in both the Nordic and Continental European countries. There are, however, two exceptions— Italy and Portugal—where fairly high levels of union cohesion coincide with weak employer organization (Visser, 1996). In any case, there is some evidence that types of welfare states and industrial relations systems go hand-in-hand. The simple correlation between levels of co-ordination and a dummy variable for the social demo-

The Democratic Class Struggle Revisited

21

cratic, liberal, and conservative welfare state model is, respectively: + .45, -.25, and -.13. And for union centralization, the respective correlation is: + .41, -.52, and +.15. These are weak correlations, but they do indicate that social democratic welfare regimes stand out for their greater degree of co-ordinated and centralized bargaining systems; the liberal for the opposite. There is clearly no prevailing pattern among the conservative welfare states.6 Employment Regulation and Worker Rights At the core of the contemporary 'Eurosclerosis' debate and, more generally, of the attack on the welfare state, lies the problem of labour market regulation. There is the widespread view that excessive rigidities contribute to, and probably cause, persistent mass unemployment, long-term unemployment, and sluggish job growth across Europe (Giersch, 1985; Siebert, 1997; OECD, 1994a; Scarpetta, 1996).7 The regulatory framework of labour markets consists of three main types of 'rights', each in principle conducive to the promotion of rigidities.8 There are, firstly, social benefits. These may have a double effect. On the supply side, a high reservation wage (and tax-wedge) may entrap people in unemployment or assistance dependency; on the demand side, an expensive welfare state imposes high fixed labour costs on employers. The second has to do with wage structure and, in particular, with the minimum wage. If wages are too undifferentiated and/or the minimum is too high, the less productive workers will find themselves priced out of the market, and employers are more likely to opt for labour substitution investments. This will most likely affect weaker groups such as youth, women, and increasingly, the less skilled.9 And the third has to do with job rights and, in particular, with the cost of worker dismissals. In this case, the link to employment outcomes is more indirect since rigidities of this kind will primarily affect turnover across business cycles.10 6

The data refer to 1980, that is before the contemporary era of widespread deregulation and occasional trade union decay. In OLS regressions, the coefficients are significant for the social democratic welfare state and for the liberal welfare states only as regards the co-ordination variable. 7 The empirical validity of these claims will be examined in Part II of this book. For an overview of the debate and evidence, see Alogoskoufis et al. (1995), Nickell (1997), and EspingAndersen (1998). 8 Rigidities is a rather unfortunate concept with pejorative overtones. Most economists seem to use it to describe practices and regulations that inhibit automatic market clearing. I use it here and elsewhere mainly as shorthand for measures which inhibit employer prerogatives. It is evident that it has affinities to concepts like de-commodification. 9 A recent and balanced overview can be found in Dolado et al. (1996) and in Card and Krueger(1995). 10 For a discussion, see Buechtemann (1993), OECD (1994a), Blank (1994), and Bentolila and Bertola (1990).

22

Varieties of Welfare Capitalism

As Buechtemann (1993) and many others have noted, this complex of regulations and 'rights', whether legislated or bargained, is of very recent vintage. Most countries' regulatory framework dates back to the late 1960s and early 1970s, when trade union bargaining power was at its strongest and worker militancy at a peak. It coincides, in other words, with welfare state maturation and with the end of the post-war growth-boom. On all three measures, there is no doubt that Europe as a whole exhibits pervasive regulation in comparison to the Anglo-Saxon countries in general, and the United States in particular. The reservation wage is typically more generous, the minimum wage relatively higher, and dismissal protection much stronger. For an overview, see Table 2.2.

TABLE 2.2. Labour market regulations and worker job rights Unemployment benefit as a percentage of APWa

Minimum wage as a percentage of average13

UK USA

32 32 31 23 14

35 45 40 39

4 3 2 7 1

Denmark Finland Norway

60 45 40

54 52 64

5 10 11

Sweden

30

52

13

Austria Belgium France Germany Italy Netherlands Portugal Spain

43

62

16

57 48 43 5 58 42 41

60 50 55 71 55 45 32

17 14 15 21 9 19 20

Japan

10

—

8

Australia Canada New Zealand

Synthetic rigidity ranking0

a APW = average production worker. Unemployment benefits are net, after tax as a percentage of average production worker earnings, for single person for 1991. Source: OECD, 1994a, Part II, Table 8.B.I. b The data refer to 1993, except Canada and New Zealand (1991). Source: Dolado et al, 1996, Table 1; and OECD, 1994a, Part II; Chart 5.14. 0 This is an average index based on four different rankings of employment protection, and refers to the situation in the late 1980s-early 1990s. Source: OECD, 19946, Part II, Table 6.7.

The Democratic Class Struggle Revisited

23

As Table 2.2 shows, Europe's social minima are in general appreciably higher than in the liberal, Anglo-Saxon world. Vice versa, European countries score much higher in terms of 'rigidities'.11 There are, however, several important qualifiers. The first is methodological. These are all 'stylized' measures. Unemployment benefit rates refer only to single persons; the minimum wage estimates do not include special low-pay provisions, for example for apprentices. And the measure of job protection (rigidity) is a composite of dismissal and hiring rules (cost of dismissal, periods of notification, and so on). These indicies are also static which is problematic since most European countries have undergone waves of labour market deregulation over the past ten years. The second qualifier is substantive. Not only do nations differ as to whether employment regulations are negotiated, legislated, or simply customary, but it is realistic to assume that official rigidities coincide with, and are offset by, informal flexibilities (and vice versa). Powerfully regulated labour markets, such as the Italian, introduce flexibility through the back door, be it in the form of black economy activity, under-declaration of wages, franchise work, or self-employment on contract. Unregulated labour markets, like the American, may officially permit hiring-and-firing at will, but in reality at least the primary, core workforce enjoys benefits and rights that are not that different from common European experience. The third qualifier is comparative. As shown, the Continental European countries are invariably rather 'rigid'; the Nordic, rather less so. Indeed, Denmark would appear quite deregulated in any comparison. Superficially this seems to contradict a standard 'working-class mobilization' hypothesis. Why have the Scandinavian labour movements not translated their (erstwhile) immense bargaining power into worker protection? How is it that comparatively weak labour movements, such as the French or Spanish, have seemingly been victorious? The answer is that 'power' can translate into diverse protection strategies. The modest levels of'rigidity' in the Nordic group reflect a strategy of harmonizing flexible employment adaptation with individual security through full-employment promotion, active labour market policy, and welfare state guarantees. In contrast, the unusually high levels of worker security that characterize especially Southern Europe reflect an implicit familialism in labour market management, namely the urgency of safeguarding the earnings and career stability of the male bread-winner.12 1 ' Italy's very low unemployment benefits reflect its dual approach to unemployment protection. Most experienced workers will receive Cassa Integrazione at roughly 80 per cent of normal wages. Inexperienced workers have no real claims on benefits. 12 Hence in Italy and Spain, married males with children are given privileged treatment in virtually all industrial relations matters, especially in hiring-and-firing decisions.

24

Varieties of Welfare Capitalism FROM DE-RURALIZATION TO POSTINDUSTRIALIZATION

Post-war welfare capitalism presided over the era of high industrialism. While mass production was booming, agricultural decline produced a massive outflow of rural populations. We are, today, in a parallel situation. The tertiary economy evolves on the backdrop of 'de-industrialization' which, once again, casts off masses of relatively low-skilled workers. In fact, present-day job destruction hardly appears dramatic when confronted with its predecessor. As we shall see, our ability to offset industrial job decline with tertiary jobs today is not inferior to past experience—on the contrary. De-ruralization failed to produce a social trauma because labour markets were bouyant, cohorts were small, and because women remained at home. What has changed can be summarized in three factors: one, less skilled and inexperienced workers are increasingly difficult to absorb in the new employment structure; two, women's altered roles imply that the clientele for a full employment commitment has been vastly augmented; and, three, the presence of welfare states and strong unions means that the management of employment dislocation is radically different. In most advanced economies de-ruralization coincided with the end of World War Two. Hence, labour markets had to simultaneously absorb a vast agrarian surplus and millions of demobilized soldiers. Yet, a relapse into pre-war, depression-level unemployment failed to materialize because factory and construction employment boomed. Bolstered by liberalized trade (and, in Europe, the Marshall Plan) and insatiable consumer demand, masses of low-qualified workers were thus absorbed in well-paid, secure jobs—which, in turn additionally fuelled demand and employment. But also embryonic welfare state expansion helped. The growth of mass education helped absorb labour surpluses, and in the United States the importance of the G.I. bill cannot be overestimated. There are several reasons why a similarly favourable dialectic does not operate in our epoch of de-industrialization and tertiarization. Foremost among these is altered demographics. The cohorts that entered in the 1950s were lean due to low fertility in the 1930s; the 1980s had to absorb the bloated baby-boom generations. Altered female behaviour is equally crucial. The rise in female employment began in earnest during the 1960s and exploded during the subsequent two decades, exactly at the moment when male factory jobs were disappearing. The tertiary sector may be capable of creating huge numbers of new jobs. But, since service productivity grows slower than in industry, strong wage growth becomes more difficult to sustain. And the service sector is less likely to provide well-paid

The Democratic Class Struggle Revisited

25

first-entry employment to yout nd low-skilled workers. Hence the widespread belief that full employment will necessitate unequal wages, slower real-wage growth, and less worker security. The exodus from agriculture in the post-war decades was, in most countries, easily managed through job growth in industry and distribution. Neither demographic pressures nor rising female activity rates exceeded nations' net capacity for job expansion. As can be seen in Table 2.3, this was less the case in France, and even less so in Spain and Italy, two nations with retarded de-ruralization. The timing of de-ruralization in Spain has been especially unfortunate since it coincides almost perfectly with deindustrialization and demographic pressures—hence Spain's presently record-high unemployment levels and unusually low activity rates (Jimeno and Toharia, 1994; Toharia, 1997). While industrial job decline over the past two decades is on a scale that is reminiscent of de-ruralization a generation ago, service growth is even brisker than was once industrial job growth. Why, then, do we now seem to have an especially acute employment problem? The reason does not lie in service growth per se, but in a combination of possible circumstances. The most cited reason has to do with labour market regulation and rigidities ('Eurosclerosis'). The case in favour of Eurosclerosis is rather weak, but there are two additional explanations.13 One refers to the nature of services and service employment; the other to the growth and composition of labour supply. Table 2.3 presents data for the two decades in which a given country experienced its sharpest decline in rural employment and, in a parallel manner, for the past two decades of de-industrialization. The third column for each epoch presents the net surplus or deficit of industrial (service) job growth versus agrarian (industrial) job loss as a percentage of the labour force in the last year. The fourth column gives the difference between change in labour supply and employment growth as a percentage of the labour force, again as measured in the last year. Most advanced economies reached the pinnacle of industrialism and the culmination of de-ruralization in the 1960s. Literally millions of agricultural jobs were lost in the brief span of two decades. If we adopt a longer-range view, their share of total employment declined from 32 to 9 per cent in Germany, and from 25 to 8 per cent in the United States from the 1930s to 1960. France started with 30 per cent in 1949, but it took until the 1980s to arrive below 10 per cent (Marchand and Thelot, 1997: 219). In Italy, the really massive rural out-migration lagged by ten years; in Spain, by twenty. Italian agricultural employment dropped from 32 per cent of total in 1959 to 21 per cent in 1968, and 7 per cent in 1993 (Paci, 13 The issue of labour market rigidities and contemporary unemployment will be examined in Chapter 6.

26

Varieties of Welfare Capitalism

TABLE 2.3. The waves of (a) de-ruralization, and (b) de-industrialization (a) De-ruralization

Germany (1947-67) France (1946-68) Sweden (1945-65) United States (1946-67) Italy (1955-76) Spain (1960-82)

Rural decline (OOOs)

Industry growth (OOOs)

2-1 (% labour force)

(1)

(2)

(3)

Employment minus labour force growth (% labour force) (4)

-3,200

+4,360

+4.3

+ 1.6

-4,340

+ 1,920

-11.6

-0.4

-344

+300

-1.3

+0.6

-4,280

+ 7,950

+4.4

-1.3

^,240

+ 1,500

-13.6

+7.6

-2,700

+785

-13.1

-18.2

Rural decline (OOOs)

Industry growth (OOOs)

2-1 (% labour force)

(1)

(2)

(3)

Employment minus labour force growth (% labour force) (4)

(b) De-industrialization

Germany (1973-90) France (1973-93) Sweden (1973-93) United States (1973-93) Italy (1973-93) Spain (1973-93)

-1,010

+ 3,960

+9.3

-10.8

-1,740

+4,370

+ 10.7

-9.4

-415

+980

+ 13.1

-5.9

-1,495

+ 32,015

+25.0

-3.4

-770

+4,110

+ 14.8

-5.1

-1,320

+ 1,965

+4.2

-20.4

Source: ILO, Yearbook of Labour Statistics, current vols. Geneva: ILO.

The Democratic Class Struggle Revisited

27

1973; Censis, 1995); and Spanish from 42 per cent in 1960 to 25 per cent in 1970 and 10 per cent today (Espina et al., 1985: 153).14 Had these masses of largely unskilled workers not been so painlessly absorbed, the likely result would have been more social polarization and a downward pressure on wages. Such a scenario would hardly have brought us strong unions, a 'democratic class struggle' and declining class-correlates. In Germany, Sweden, and the United States, manufacturing or total employment expansion more than compensated for de-ruralization plus labour force growth. But where there was a notable manufacturing job deficit, as in France and subsequently in Italy, there was also less of a democratic class struggle in Lipset's terms. Indeed, these were the very same polities that social scientists diagnosed as 'exceptional', stubbornly 'ideological', 'oppositional', and polarized (Dahl, 1966; Blackmer and Tarrow, 1975; Crouch and Pizzorno, 1978; Lange, Ross, and Vanicelli, 1982). While economists such as Bentolila and Dolado (1994) point to inflexible labour markets and a strong insider^outsider divide as the chief reason for Spain's persistently high unemployment levels, the real culprit may simply be the rotten timing of structural change (Marimon and Zilibotti, 1996). In any case, 'high industrialism' produced an occupational structure that mirrored the national mix of manufacturing, construction, and distribution. Where, as in the United States, mass consumption was more developed and manufacturing productivity levels higher, the bias in favour of clerical and sales jobs became stronger. In contrast, Europe became considerably more 'industrial'. Peaking in the 1960s, the German, British, and Scandinavian manual working class accounted for roughly 40-42 per cent of the labour force, compared to only 34 per cent in the United States.15 Family Behaviour and Full Employment

It is equally unlikely that full employment would have been achieved had it not been for housewifery. Had de-ruralized women—like men—sought employment, it is possible that post-war Sweden, Britain, or America would have looked more like Spain today. Fortunately for the fullemployment commitment, there was very little growth in labour supply; in part because of sheer demographics (small birth cohorts); in part because of family behaviour: the post-war urban working class embraced the male bread-winner, female housewife model. 14

Britain, of course, was an exception given that agricultural decline occurred much earlier. Delayed de-ruralization in Italy meant also that the industrial working class proper remained smaller. At the height of Italian industrialism, say 1971, industrial workers accounted for only 34 per cent (Paci, 1973: 310). 15

28

Varieties of Welfare Capitalism

The economic status of women in these decades was, in reality, less straightforward. Participation rates of M«married women were hardly affected at all whereas a dramatic, albeit dualistic, change occurred among married mothers. On one side, masses of previously active 'rural' or working-class women now chose to remain at home, a choice made possible by their husbands' ability to earn a steady family wage. We thus register a sharp reduction in female activity rates in countries as different as France, Italy, and Sweden. On the other side, this was also the epoch that catalysed married women's integration in the economy. First in America and later in Europe, booming mass consumption created a ready-made female labour market of sales and clerical jobs. As married women's presence in the labour market grew, eventually also so did demand for personal and social services. Still, on balance the low birth rates of the 1930s and 1940s, combined with little growth in women's labour supply, were key factors in the postwar full employment performance. High fertility in the 1950s and 1960s, combined with the ensuing explosion of female employment, are probably more important than labour market rigidities in accounting for today's employment deficit. A comparison of columns 3 and 4 in the upper and lower half of Table 2.3 summarizes the epochal shift: in the post-war decades, the industrial boom absorbed the effects of de-ruralization, and full employment was achieved because of feeble labour supply growth. Today, service growth more than compensates for de-industrialization but there is mass unemployment because of an explosion in supply. Viewed historically, then, the contemporary postindustrial job disease is not necessarily the result of rigidities, equality, or 'Eurosclerosis'. The real problem is simply that Europe is comparatively less capable of managing the postindustrial family in general, and women's desire to work in particular. It is this which demands explanation. The apparently contradictory behaviour of married women in the postwar years is best explained by class differences. It is not surprising that deruralization causes a decline in female employment. In agriculture women typically work, so if the wives of millions of urbanized males choose housewifery, the result is that the male bread-winner family becomes a mass phenomenon. There is some evidence that households' post-war employment choices were class-distinct: that the full-time housewife option was prevalent in the working class, while the career option was at first the preference of better-educated middle-class women. Basically, working-class families emulated the middle-class norm of housewifery at the very moment that middle-class women began to distance themselves from it. The 'Ozzie and Harriet' model seemed to depict the standard American middle-class family; in reality, it was more of a working-class phenomenon.16 16 For a treatment of married women's employment behaviour in the 1950s and 1960s, see Goldin (1990) for the United States, and Tilly and Scott (1987) for Britain and France. In

The Democratic Class Struggle Revisited

29

The post-war political economy, then, was built around a set of family prototypes that are now becoming marginal if not outright extinct. The post-war woman was assumed to be a housewife, and the male a 'standard production worker', meaning a semi-skilled, manufacturing worker who is sole provider of family income and social entitlements. It was further built on a life course prototype: women would cease to work with marriage and childbirth, and thus be available to care for, first, children and, later, aged parents. This assured that families were largely self-sufficient in the production of personal and social service needs. And men would follow a rigid sequence of schooling until age 16, unintempted employment until age 65, followed by some years in retirement.17 Of course, prototypes are meaningful only if they adequately represent a critical population mass; only if living conditions and life chances are sufficiently homogenous. The Declining Correlates of Class

Welfare capitalism undoubtedly did homogenize the distribution of welfare everywhere. But here we must consider two factors. One, the prototypical division of family labour began to unravel with accelerated pace from the 1960s onward. Two, there never was a universal 'standard production worker' that fitted all countries precisely because, as previously argued, institutional differences matter. This can be seen in prevailing pay inequalities. As the full-employment, industrial era reached its climax, say around 1970, European workers in the lowest quintile earned roughly 65-70 per cent of the median, compared to only 41 per cent in the United States. The concommitant upgrading of social security systems in the 1960s and 1970s produced a similar kind of national bifurcation. As the European welfare states moved towards universalism and from minimum to full income maintenance, they created also a fundamental homogenization of life chances and welfare. A similar leap did not occur in the liberal, Anglo-Saxon welfare states (Skocpol, 1995). To a degree, private and especially company benefit plans compensated for stagnant public commitments. But strong dualisms emerge if, as in the United States, occupational benefits remain limited to the more privileged primary Sweden, arguably one of the least 'familialistic' of societies, women's employment rate declined from 43 per cent in 1930 to 35 per cent in 1950 (OECD, 1994c: 130). Hard data do not exist, but working-class women's declining activity rates are connected to de-ruralization and possibly also to the early waves of 'de-industrialization' which, incidentally, hit female industries like textiles and leather. The class specificity of women's post-war employment behaviour is also argued by Lipset and Bendix (1959) and Fuchs (1983). 17 The 'standard production worker' concept has been applied by organizations such as the OECD for the purpose of assembling internationally comparative statistics, and of estimating the economic position of a typical household.

30

Varieties of Welfare Capitalism

economy workers. As we have seen, by the 1970s only half of the American workforce was entitled to occupational pensions; about two-thirds to a health-care plan.18 But to some extent the impact of nationally specific inequalities was muted by sustained, across-the-board real earnings growth. From 1949 to 1969, the average American factory worker saw his real annual earnings increase by 65 per cent (Levy, 1988, Table 7.2). In Europe, the rise in prosperity began a little later but was even more phenomenal; from 1960 to 1973, average real manufacturing wages in Europe rose by 76 per cent (calculated from OECD, Historical Statistics, 1960-1990 (1995)). If not identically, the correlates of class did decline and this, in turn, gave credibility to the pluralist ideal of a middle-class society. This ideal was in reality a composite of truths and assumptions. Among the former was a decisive democratization of lifestyles: the vast majority could now enjoy a consumption standard that once had been the prerogative of the upper strata (such as homeownership, washing machines, and automobiles). To this we should add the elimination of traditional working-class risks of poverty, insecurity, and want. The main assumption, of course, was that upward class mobility was possible for all with talent, drive, and acumen, regardless of social origin. The promise of upward class mobility remained more of a nirvana. Indeed, Lipset and Bendix's (1959: 165) data from the 1950s show that 80 per cent of American workers spent their entire working life in manual occupations. There was certainly social mobility, but it was mainly confined to moves between different manual jobs, or to the attainment of a white-collar job by working-class children. The lion's share of intergenerational upward mobility has been due to changes in occupational structure (more white-collar jobs) rather than greater openness (Erikson and Goldthorpe, 1992). A similar picture emerges with regard to educational achievement. The great push towards educational expansion in the postwar era was meant as a policy of equal opportunity. Certainly, a massive across-the-board upgrading in educational levels has occurred everywhere. The proportion of a cohort which has attained at least upper secondary schooling has, in many countries, doubled since the 1950s. Yet, raising the stakes seems not to have affected class differentials. All evidence suggests that patterns of class recruitment have changed very little (Shavit and Blossfeld, 1993). 18 The wage data discussed in the text derive from OECD (1993, Table 5.2) and refer to male wage-earners only. The uniformity of European wage profiles is brought out by the rather narrow variance between countries. The most egalitarian was the Netherlands (with 78 per cent of median pay), and the most inegalitarian France (with 61 per cent). Virtually all other nations hover around 70 per cent.

The Democratic Class Struggle Revisited

31

CONCLUSION Before we turn to the welfare state it is important, once again, to underline that the post-war achievement of less inequality with, typically, full employment and rising prosperity was probably more due to wellfunctioning labour markets and fortunate demographics than to the coming of the welfare state itself. As far as the first two post-war decades are concerned, the chief impact of welfare states on equality and employment was limited mainly to the consolidation of social citizenship rights. Where welfare states made a huge difference was their ability to guarantee against social risks.

3

Social Risks and Welfare States INTRODUCTION National welfare states espouse radically different notions of equality, but variant conceptions of equality coexist also within individual welfare states. Some welfare states (or programmes) put the stress on individual equity. This is evident in traditional, contribution-defined social insurance: you receive in proportion to what you paid in. Status-segmented social insurance, which is the norm across Continental Europe, follows a corporatist logic. Means-tested benefits will easily provoke stigma and dualisms, while universal programmes deliberately aim to eliminate any kind of status distinction. Some welfare states, the Nordic in particular, vocally battle gender inequality with the aid of social services and paidleave schemes; others pursue a similar objective through quotas or affirmative action. The 'egalitarian' result is unlikely to be similar. What is to be equalized differs also. The Scandinavian social democrats have now for decades defined their target as the equalization of social resources, a multidimensional across-the-board programmatic effort to level social capital; in contrast, the liberal Anglo-Saxon approach is selective, singling out disadvantaged groups for 'sponsored mobility'. There is an argument to be made that egalitarianism is a derivative consequence of what is and always was the foremost objective behind social policy, namely insuring the population against social risks. How, to what degree, and which kinds of risks are pooled collectively will certainly have immediate—but none the less derivative—consequences for poverty, income distribution, economic opportunities and, more generally, for social solidarities and stratification outcomes. It is accordingly useful to begin with social risks. Indeed, the controversial issue of welfare state decommodification, and the debate on models of solidarity are, in the last instance, intrinsically bound up with the management of social risks. The distribution of social risks varies by social class, sex, and age, just to mention a few. It also changes across history. The post-war welfare state has been noticeably successful in minimizing many of the risks that plagued our parents' generation, particularly those related to old age. As we shall see, postindustrial society is altering the risk structure in dramatic

Social Risks and Welfare States

33

ways; in part because new inequalities are emerging; in part because of labour market and demographic transformation. To address these issues, let us begin with a retrospective. The welfare state is one among three sources of managing social risks, the other two being family and market. How risks are pooled defines, in effect, a welfare regime: the state's role can be defined as residual and minimalist or, alternatively, as comprehensive and institutional as regards the range of risks that is to be considered 'social', or the collectivity of people that is to be considered eligible for protection. Until the twentieth century, most risks were not considered social, that is, a matter of state. For one, nineteenth-century society was still predominantly rural. Additionally, the infrastructure of public administration, statistical bookkeeping, and taxation remained inadequate to the task of collectivizing social risks on a mass scale (Wilensky, 1975). What we call the welfare state may have its roots in, but certainly does not begin with, late nineteenth-century social reformism. The welfare state is a peculiar historical construction that began to unfold between the 1930s and 1960s. Its promise was not merely social policy to alleviate social ills and redistribute basic risks, but an effort to rewrite the social contract between government and the citizenry. When, therefore, we today debate the pros and cons of the welfare state it is absolutely necessary that we keep in mind that it was built to cater to an historically specific population distribution with its historically specific risk structure. The post-war welfare state was premissed upon assumptions about family structure and labour market behaviour that, today, are largely invalid. Risks that in the 1950s or 1960s were assumed away are now becoming dominant. Vice versa, the post-war welfare state being the child of the 1930s Depression and the 'workers question', was moulded on a society in which the prototypical client was a male production worker. This client is now rather hard to find. A first step towards an understanding of the contemporary welfare state crisis must begin with: (a) a diagnosis of the changing distribution and intensity of social risks, and (b) a comprehensive examination of how risks are pooled and distributed between state, market, and family. THE STATE IN THE WELFARE NEXUS Welfare state research is often guilty of conceptual confusion. Some speak of welfare states, some of welfare regimes, some simply of social policy as if the meaning were the same. It is not. Social policy can exist without welfare states, but not the other way around. Social policy has existed as long as there has been some kind of collective political action in address to a social risk. It was social policy, not a welfare state, when the Romans

34

Varieties of Welfare Capitalism

meted out food to the poor; when the church, guilds, or nobility distributed charity and alms; or when nascent nation states and absolutist monarchs legislated poor relief (and welfare plans for public employees). We usually date modern social policy (and often also the welfare state) to Bismarck's social insurance laws in the late nineteenth century. But does the existence of a pension scheme, even if complemented with sickness and unemployment insurance, imply the birth of a welfare state? Bismarck, in persona, would probably have answered in the negative because his stated ideal was a monarchy of subservient subjects, not of citizens endowed with democratic rights. The welfare state is something other than whatever menu of social benefits a state happens to offer. Many would date the arrival of welfare states to the moment when a basic repertoire of social policies was in place. In this case, Britain was a welfare state in 1920, as was Nazi Germany, and Franco's Spain in the 1960s. But if it is to have any meaning at all, the welfare state is more than social policy; it is a unique historical construction, an explicit redefinition of what the state is all about. Without usually giving it much thought we tend to equate the welfare state with post-war capitalism: since the war, we live in a 'welfare state'. The term ushered in a new political commitment, a rewritten social contract between the state and the people. As T. H. Marshall (1950) put it, this implied a recognition of citizens' social rights and a promise to bridge the divisions of class. We cannot separate the welfare state ideal from its historical context. Roosevelt's New Deal and Swedish social democracy's 'Peoples' Home' were parallel efforts to rewrite the relationship between citizen and state, an affirmation that welfare and capitalism need not be incompatible. Western nations became self-proclaimed welfare states in the post-war decades, perhaps to underline their social reformist enthusiasm, but certainly also because the Cold War rivalries necessitated a visible attention to equality, full employment, and social welfare. Studying just the welfare state leaves a huge 'welfare residual' unaccounted for. During the 1980s, there emerged a large comparative literature which sought to remedy this by examining the interplay of public and private provision.1 By so doing, the term 'welfare state' became misleading since what was being studied was the broader package of welfare production and distribution. Hence emerged the practice of using terms like 'welfare regimes'. A welfare regime can be defined as the combined, inter1

Representatives of this, so-called 'second-generation' welfare state research include Stephens (1979), Korpi (19806, 1983), Myles (1984), Castles (1986, 1993), Palme (1990), and Kangas (1991). Explicit and systematic efforts to identify the public-private mix include Rein and Rainwater (1986), Esping-Andersen (1990), West Pedersen (1994) and, most recently, Shalev (1996).

Social Risks and Welfare States

35

dependent way in which welfare is produced and allocated between state, market, and family.2 The family, however, tends to disappear within the perspective of comparative political economy. Political economy needs to become more sociological. The Misunderstood Family Take any sociology textbook, and the family is defined as a core societal institution, the micro-foundation of society. The same textbook will, most likely, inform us that once the principal locus of production, consumption, and reproduction, the family's productive role was eclipsed with industrialism. Its most important remaining function is to provide emotional integration: it has become a 'haven in a heartless world', to quote Lash (1977). If this were an adequate depiction of reality, the standard political economy approach would remain valid. However, the single most compelling critique that comes from feminist scholars is that everywhere women's unpaid domestic work remains a major—and in some countries, dominant—source of welfare; that the family never ceased being a producer. In fact, the post-war welfare state's male- and income-transfer bias could be upheld because of households' own social servicing.3 The Welfare Triad The family, then, cannot be dismissed as a haven of intimacy and consumption. It is an all-important actor whose decisions and behaviour directly influence, and are influenced by, the welfare state and the labour market. Welfare regimes must be identified much more systematically in terms of the inter-causal triad of state, market, and family. It is vital to recognize that these represent three radically different principles of risk management. Within the family, the dominant method of allocation is, presumably, one of reciprocity. To be sure, this does not necessarily imply full 'equality' in the intra-household allocation of 2 To this triad we should rightfully add the 'third sector' of voluntary, or non-profit, welfare delivery. In some countries, the voluntary sector (often run by the Church) does play a meaningful, even significant, role in the administration and delivery of services. Thus, in Germany and Austria a large part of health care is, like the American Blue Cross-Blue Shield plan, non-profit. Cross-national comparisons are rare indeed, and this obviously hampers any attempt at systematic examination. Salamon and Anheier (1996) suggest its role is largest in the USA, the UK, and Germany, and very small in Italy; that typically more than half its workforce are paid employees, and that the lion's share of revenue comes from fees and from public subsidies. However, social services generally account for only a small proportion of its total activities (on average 40 per cent). 3 By 'third generation' I here mean the literature that blossomed in the 1990s, to an extent dominated by feminist critiques of what they call the preceding 'mainstream', male view. This literature will be discussed in more detail below. For an overview, see O'Connor (1996).

36

Varieties of Welfare Capitalism

resources.4 Markets, in contrast, are governed by distribution via the cash nexus, and the dominant principle of allocation in the state takes the form of authoritative redistribution—which, again, does not imply egalitarianism.5 It would be easy to assume that the three welfare pillars are functional equivalents and, therefore, mutually substitutable: markets will pick up where the state and family leave off, and vice-versa. This is a hazardous assumption. Markets can and do fail; only the most naive romantic can believe that the family's historical monopoly of care and self-help can be resurrected; and not even Stalin assumed that the state could do everything. The basic reason has to do with the variable capacity of the three institutions to manage and pool social risks. At the macro-level, the welfare production of either of the three components is obviously related to what happens in the other two. And at the micro-level, individuals' welfare depends on how they manage to 'package' inputs from the three. To exemplify, a traditional male bread-winner family will have less demand for private or public social services than a two-career household. But, when families service themselves, the market is directly affected because there will be less labour supply and fewer service outlets. In turn, if the state provides cheap daycare, both families and the market will change: there will be fewer housewives, more labour force participation, and a new demand multiplier caused by double-earner households' greater propensity to purchase services. The household is the ultimate destination of welfare consumption and allocation. It is the unit 'at risk'. How social risks are managed and distributed between state, market, and families themselves makes a huge difference. THE FOUNDATIONS OF WELFARE REGIMES: RISK MANAGEMENT Social policy means public management of social risks. Some risks are perennial, some come and go with the flow of history. People have, throughout modern civilization, faced poverty, homelessness, handicaps, violence, and sudden death, but not always unemployment or nuclear radiation. Some risks, such as old age infirmity, are 'democratic' because 4 Nor does reciprocity imply that exchange is a matter of unselfish giving. It is altogether possible that reciprocity means unavoidable obligations, an act of investment with a view to future returns, or a perceived compulsion to pay back 'debts'. 5 Some insist that the triad should rightfully be presented as a diamond, with a fourth leg reserved for the 'third sector' such as charity, co-operatives, and voluntary associations. In principle, I would have no objections. In practice, it may make little empirical difference. As we shall see below, where its role is more than peripheral it is because it is subsidized by the state—i.e. a semi-public delivery agency.

Social Risks and Welfare States

37

they will afflict us all; others, such as unemployment and poverty, are socially stratified. Still other risks are life-course specific, income loss in old age for example. One does not have to be a functionalist to recognize why the management of risks has become increasingly collective. An individual risk becomes 'social' for three reasons. Firstly, this happens when the fate of an individual (better, many individuals) has collective consequences; when the welfare of society is at stake. Herein lies, in fact, the most compelling reason why social protection is a precondition for economic efficiency. If, for example, people without social security risk unemployment they are more likely to resist any kind of technological change that would augment that risk. Secondly, risks become social simply because society recognizes them as warranting public consideration. And thirdly, the growing complexity of society itself means that an ever larger share of risks originates from sources beyond the control of any individual. This is a compelling explanation for why mobilized political power has, over the past century, struggled to de-individualize and also de-familialize the burdens of risks. Dependency on market income is a primary catalyst of generalized risks because survival itself is at the mercy of conditions over which individuals have little say; markets cannot guarantee an income, nor a job. Because market economies are dynamic, workers may find themselves technologically redundant; because they are competitive, the less endowed may find themselves marginalized. Mass unemployment is a phenomenon unique to wage-earner societies. Family and Market 'Failures'

The more that risks are generalized, the more it is likely that family and market will 'fail'; rendered incapable of adequately absorbing risks. The pre-industrial family internalized most social risks by pooling resources across generations. The starting point of functionalist welfare state historiography is that industrialism renders this model unworkable. This is then what brought about the welfare state. There is one problem in this causal reasoning, namely that it seems to assume that the market was never an effective alternative to family. But why not? If capitalism implies the triumph of all kinds of markets, then why not also for social risks? Of course, no one would deny that markets always have played a role in social protection. There exist however a number of well-known theoretical reasons why markets are problematic and ultimately insufficient.6 6

The following discussion is indebted to the work of Barr (1993).

38

Varieties of Welfare Capitalism

Firstly, as Polanyi (1944) so forcefully argued, an unfettered labour market may jeopardize societal survival. The pure market is unlikely to 'clear' unless all participants are effectively commodified, meaning that they adjust perfectly to demand and supply. Distortions will emerge if people command alternative sources of welfare, such as a guaranteed income. The contradiction is that if individuals do not have access to nonmarket guarantees, their capacity to be free, unconstrained, market agents is reduced, even nullified. A first principle in free exchange is that the actor has the possibility of withholding the product until the 'price is right'. However, this is not possible if basic existence is at stake. The labour market can therefore only be a real market when, paradoxically, it has been distorted, reduced, and tamed; when participants have access to sources of welfare other than earnings. Trade unionism and collective bargaining have historically been the major instrument of taming the market and freeing the worker; but not of securing a guarantee of welfare independent from the market.7 Collective bargaining is only powerful if the individual members can permit themselves the luxury of being solidaristic, and this means that the opportunity cost cannot be too high. There exist, in fact, three fundamental theoretical reasons why markets are insufficient: imperfect competition, market failure, and information failure. Imperfect competition, due generally to monopolistic or collusive practices, will distort prices. Customers of welfare services, medicine, or private pension plans may, for example, be forced to be price (or quality) takers if supply is controlled or prices fixed. Similarly, monopolistic trade union bargaining on behalf of the insiders may exclude the outsiders; employer blacklisting of, say, trade unionists or other undesirables is a similar case. Imperfect competition makes a case for public regulation of price setting, but not for a welfare state. The case for a welfare state is substantially stronger when we consider market failure. A commonly cited example are externalities which occur when someone (say a polluter) imposes costs (such as cancer) on innocent others. A more serious source of market failure stems from the unequal distribution of risks. Some risks are 'good'; some are de facto uninsurable. Private insurance companies are usually happy to insure a young, educated, and healthy citizen against almost anything at an affordable rate. Older, disabled, and unskilled workers will, however, find it difficult to 7 Until the 1930s, trade unions (and socialist movements more generally) saw themselves as direct providers of social protection and in many countries (including the United States) their role was quite substantial. However, the economic depression of the 1930s testified to their fragility. Inherently, workers' friendly societies can only function well when members' risks are few. Mass unemployment easily causes bankruptcy. For a discussion, see Esping-Andersen (1990).

Social Risks and Welfare States

39

purchase an insurance that they can pay. Or, think of private risk pooling along occupational lines: voluntary private unemployment insurance for software programmers would most likely cost and spend little; a similar one for miners would, today, charge exorbitant rates and still face bankruptcy. The problem is that 'bad' risks are often the ones that are most desperately in need. Orthodox liberals, and the Malthusians in particular, advocate 'selfhelp'; 'bad risks' should fend for themselves. This is not necessarily evidence of human cruelty, only of strict adherence to a theory that believes that public aid to the indigent yields nothing but more indigence. Whether social aid creates poverty traps and negative work incentives is one matter. It is another matter if it also leads to society-wide dis-utility. In essence this is what the 'reformed liberals', like John Stuart Mill, came to realize. A telling example was the dismal performance of the British during the Boer war, the principal reason being the downtrodden quality of working-class recruits. Hence, even leaving ideology aside there exist purely rational reasons in favour of a welfare state solution. But what kind? Barr (1993) argues that if market failure is confined to select bad risks, a sufficient solution would simply be a residual welfare state on behalf of those who are barred from, or discriminated by, the market. There is no a priori reason why social policy should cater to the good risks. Such is in practice the philosophy that underpins liberal, Anglo-Saxon welfare regimes, and especially the American. The problem of information failure, if taken seriously, can however only be resolved with a comprehensive and universal welfare state. Why? Economic theory of markets assumes perfect knowledge, yet the real world of risks precludes this almost by definition. Few individuals have the means to forecast the business cycle, predict a calamity, or to shop around for the best offer in liver transplants. We must seek the advice of experts. The experts, like doctors or insurance brokers, are often the very same that wish to sell us their welfare product. How can we have faith in their advice unless we, too, are experts? But, expert or not, the error margin in the calculus of social life is huge. Even if it is common knowledge that divorce is on the rise, young newlyweds cannot be blamed if they believe in everlasting marital bliss. Few teenagers can envisage themselves with Alzheimer's disease later in life. No freshly trained typesetter in 1960 could have imagined that computers would eliminate, a few years later, his entire profession. If it is difficult for one-fifth of adult Americans to understand the instructions on an aspirin bottle, as OECD (1996a) shows, information failure is not just an individual but a national problem. If, as social policy-makers, we assume that most citizens lack (and cannot obtain), the kind of information needed for private welfare markets to

40

Varieties of Welfare Capitalism

work fairly and efficiently, we would be compelled towards a welfare state design that is universalistic and comprehensive. THE DISTRIBUTION OF RISKS AND MODELS OF SOLIDARITY Social risks are the building blocks of welfare regimes. Some risks are purely random, but most occur with sociological regularity. These can be classified along three distinct axes; 'class risks', 'life-course risks', and 'intergenerational risks'. They can all be internalized in the family, allocated to the market, or absorbed by the welfare state, but it can easily be demonstrated that class and intergenerational risks require a welfare state solution. Where the state absorbs risks, the satisfaction of need is both 'defamilialized' (taken out of the family) and 'de-commodified' (taken out of the market). Class Risks

The notion of'risk classes', to follow Baldwin (1990), implies that the likelihood of a social risk is unevenly distributed across social strata. Miners are more prone to occupational injury than are college professors; the unskilled are particularly vulnerable to low earnings and unemployment; lone mothers run a high risk of poverty. High-risk strata will, almost by definition, find it difficult to obtain affordable insurance in the market and the family is unlikely to be an effective alternative considering that the risk profile of household members is apt to be similar. The way that welfare states manage risk inequalities is therefore also a politics of solidarity, of social stratification. We can here distinguish three distinct models of welfare state solidarity. These reflect historically dominant constellations of collective political mobilization (Baldwin, 1990; Esping-Andersen, 1990). One is a residual approach which limits its aid to targeted ('bad') risk strata—say, lone mothers, the disabled, or the demonstrably poor. A residual approach to risk pooling divides society into them and us: on one side, a self-reliant majority of citizens which can obtain adequate insurance through private means; on the other side, a minoritarian and dependent welfare state clientele. Residual programmes are typically needs-tested and generally destined to be ungenerous since the median voter is unlikely to extend much support to benefits of scarce personal relevance. The second, corporativist approach pools risks by status membership. Occupational differentiation is, for two reasons, the most typical expression of corporativism. Firstly because professional status usually captures

Social Risks and Welfare States

41

similar risk profiles; secondly because occupations are a primary source of social closure and collective mobilization. To assure closure and maximize corporativist solidarities, such programmes are usually premissed on compulsory membership. Their concrete articulation depends very much on the history of collective mobilization—on the degree of segmentation. The manual, non-manual divide has been the chief axis in German social policy; France and Italy exhibit a tradition of much narrower occupational closure as witnessed by the one hundred-plus occupationally separate pension plans. The third, universalistic approach is premissed on the idea of pooling all individual risks, bad or good, under one umbrella. It implies a solidarity of the 'people'. In some cases, such as with national health-care systems, this is because the risk is universal. In other cases, such as the Nordic 'peoples' pensions' or universal family allowances, the idea is more that the risk should be shared universally. Universalism has its historical roots in two seemingly contradictory political legacies. Reformist liberals (such as Beveridge) often advocated universalism on the grounds that it minimizes bureaucracy and competitive distortions; socialists and trade unionists, because it helps overcome invidious divisions and strengthens broad solidarities. Life-Course Risks

Social risks are also distributed unequally across the life course. This was the fundamental insight behind Rowntree's (1901) notion of the 'workingclass life cycle of poverty'; the observation that poverty is especially concentrated in childhood (particularly in large families) and in old age (because earnings decline). The life cycle of poverty is closely associated with the lack of correspondence between age-specific needs and earnings: young families have costly needs and low incomes, earnings rise later on (when children have left), and then they decline sharply in old age. The family has, traditionally, been the main locus of pooling life-course risks. The classical intergenerational contract implied that the young would care for the aged in exchange for the transfer of wealth. Also markets manage life-course risks, as in the case of life insurance and private pension savings. Because high incomes in 'prime age' working life permit most individuals to save, old age security is possible to buy in the market. But the same does not obtain for young child families whose savings capacity is severely reduced. It is not surprising that traditional welfare state coverage of life-course risks has concentrated on the two 'passive' tail ends of life: on children (via family allowances) and old age (pensions). To a liberal, these reflect 'deserved' needs. More generally, since the post-war welfare state assumed

42

Varieties of Welfare Capitalism

stable male bread-winner families, its social protection efforts were directed to their job security. Women's 'risk' of motherhood was not a pressing social policy concern because women were presumably housewives; hence few maternity or parental leave provisions. The emerging outlines of postindustrial society, with heightened family instability, widespread unemployment, and more insecure careers, suggest that life-course risks are now bundling in youth and prime age, adult life. Concepts such as the 'two-thirds society' and the new underclass suggest also that entrapment in inferior life chances is a rising possibility. There is therefore easily a gap between conventional welfare state design and emerging needs that is not easy to fill with either familial or marketized welfare. Intergenerational Risks

Textbook sociology often sees modernization as the passage from ascription to meritocracy. Of course, race and ethnic discrimination testify to lingering ascriptive practices. The life chances of some groups are systematically inferior. Such inequalities appear normally as 'class risks', but if they are also inherited, the problem is one of intergenerational risk transmission. Inheritance and markets are usually mutually reinforcing. We know that occupational and educational attainment remains powerfully over-determined by social origin (Erikson and Goldthorpe, 1992; Shavit and Blossfeld, 1993). Also poverty is easily inherited. In a re-study of Rowntree's families in York in the 1970s, Atkinson (1983) found that the children from poor families were 2.6 times more likely than others of also becoming poor. Likewise, children of American welfare mothers face disproportionate risks of dropping out of school, of unemployment, and of becoming second-generation welfare dependants (Mclanahan and Sandefur, 1994). Inherited disadvantage becomes inequalities of 'social capital'. Since such inequalities are produced in the family and are then compounded in the market, intergenerational risks are unlikely to diminish unless the welfare state actively redistributes life chances. 'Class' and 'life-course' risks are primarily a question of social protection and income security, and the principal kind of equality that is involved is one of universalizing rights. Intergenerational risks, however, demand a very different and more explicit commitment to egalitarianism, primarily in the form of equalopportunity policies. There is substantial variation in how welfare states have interpreted equal opportunity. To simplify, we can distinguish a minimalist and maximalist interpretation. The former, which has been the conventional basis of policy everywhere, lies close to the notion of 'equity', or fairness. It is

Social Risks and Welfare States

43

based on the admission that society systematically discriminates against certain groups, and thus denies them an equal, fair chance. This was the classical thinking behind the expansion of universal, compulsory education: assuring equal access to human capital would annul inherited inequalities. The premiss here was, of course, that human capital is the decisive factor of life chances. The growing realization that educational attainment remains unequal and that a narrow human-capital policy is inadequate produced, in the 1960s, a watershed in the history of welfare state egalitarianism.8 As a consequence, many welfare states enlarged and redefined their commitment to equal opportunity. Some, mainly the liberal Anglo-Saxon, retained what we could call the 'minimal' definition, but with the introduction of new 'residual' affirmative action programmes targeted to socially disadvantaged groups (such as 'Head Start' in the United States). Other welfare states, especially the Nordic, adopted a more aggressive, broader, and more comprehensive approach to equal opportunity. Here the underlying principle was that disadvantage can stem from multiple sources and that, in principle, all groups face risks. Inherited disadvantage, then, goes far beyond mere human capital and comes to embrace any resource which can be considered vital for life chances. According to this formula, the problem to be solved is not merely lingering, isolated inequities but the systematic reproduction of inequalities. The attack, therefore, came to involve human capacities in general, peoples' command of the entire complex of social resources necessary to function optimally. Indeed, the Scandinavian push to provide public social services since the 1960s must be seen in this light.9 De-commodification Reconsidered The concept of de-commodification has been much debated in recent welfare state research. Originally derived from Polanyi (1944), and later developed by Offe (1972, 1984), it is meant to capture the degree to which welfare states weaken the cash nexus by granting entitlements independent of market participation. It is one way of specifying T. H. Marshall's notion of social citizenship rights (Esping-Andersen, 1990, ch. 2). 8

Here the Coleman report (Coleman et al. 1966) and the work of Jencks et al. (1982) stand

out. 9

Indeed, the famous Scandinavian 'level of living' studies were initiated (in the late 1960s) explicitly for the purpose of monitoring trends in social-resource distribution across the population (for a presentation, see Erikson et al., 1991). With hindsight, it is clear that equality in Scandinavia has been inordinately directed towards women, but there is some evidence that—at least in Sweden—the effect of class inheritance has been weakened. Sweden is a unique case where educational attainment has become somewhat decoupled from class origin (Shavit and Blossfeld, 1993). The same holds for social mobility (Erikson and Goldthorpe, 1992).

44

Varieties of Welfare Capitalism

Inherently, the concept presupposes that individuals—or their welfare acquisitions—are already commodified. It is precisely this presupposition which has guided much subsequent criticism (see especially Orloff, 1993). It may adequately describe the relationship between welfare states and the standard, full-career male worker, but it is not easily applicable to women considering that their economic role is often non-commodified or at least only partially commodified. The issue to many feminists is that most welfare states, at worst, reproduce women's imprisonment in their precommodified status or, at best, do too little to alleviate the dual burden of employment and family responsibilities. The concept of decommodification is inoperable for women unless welfare states, to begin with, help them become commodified. The conservative tradition that permeated Continental European social-policy evolution highlights, like none other, the conceptual problem. As emerged in my earlier comparisons, most Continental European welfare states score quite high on indicies of de-commodification (EspingAndersen, 1990) and, yet, they are also very familialistic. Historically speaking, conservative reformers feared raw market capitalism because it creates atomistic individualism or its dialectical opposite, socialism. To conservatives of the absolutist, Hegelian mould, it was mainly hierarchy and state authority that was under siege. In the Catholic (or East Asian Confucian) tradition, however, communitarian-familial solidarities were at stake. A conservative 'politics against the market' is a struggle to reproduce pre-capitalist institutions in a commodified world; to harmonize wage work with traditional ideals of social integration and mutualism; to combat the penetration of the cash nexus into the realm of human need and family. Hence, to a Confucian or Catholic social reformer decommodification is desirable if it bolsters familial piety and interdependency. But it is suspect, indeed ruinous, if it encourages individualism and independence. The Catholic principle of subsidiarity in its present-day form means strong welfare guarantees to the male bread-winner so as to cement familialism. This duality of de-commodification is crucial. Social democrats and conservatives differ not only in terms of who should be made independent of market compulsion but also in terms of how. In principle—but not necessarily in practice—socialist reformers always emphasized universal individual efficacy, autonomy, and economic independence. Since Friedrich Engels and, later, the Myrdals, equality between the sexes has been a sine qua non in socialist thought. Principle and reality are, of course, not always bedfellows and this is evident in the evolution of social democratic policy. Until the 1960s, the universality of the male bread-winner family was everywhere assumed. The Beveridge report which guided post-war British Labour policy held that

Social Risks and Welfare States

45

'. . . the great majority of married women must be regarded as occupied with work which is vital though unpaid, without which their husbands could not do their paid work, and without which the nation could not continue' (Beveridge, 1942: 49). The first to abandon this view were the Nordic countries, but not until the late 1960s. And the policy shift came not so much from the commanding heights of the labour movement as from a massive popular campaign led by women's organizations. In any case, the concept of de-commodification has relevance only for individuals already fully and irreversibly inserted in the wage relationship. In practice, this means that it increasingly does speak to women, too. Yet, it remains a fact that a large proportion of women (and some men) are institutionally 'pre-commodified'; their welfare derives from being in a family. The functional equivalent of market dependency for many women is family dependency. In other words, female independence necessitates 'de-familializing' welfare obligations. Familialism and De-familialization

Words like these will easily promote confusion. To an American, 'profamily' politics imply a Christian conservative effort to restore traditional family values (whatever that means). But to a Scandinavian, the term implies what Hernes (1987) calls a women-friendly welfare state: an active policy committed to lessening the caring burdens of the family. In this book 'familialism' is used to denote the former. A familialistic welfare regime is therefore one that assigns a maximum of welfare obligations to the household. And I shall use 'de-familialization', yet another admittedly awkward word, to capture policies that lessen individuals' reliance on the family; that maximize individuals' command of economic resources independently of familial or conjugal reciprocities. It is, like the concept of de-commodification, empirically more a matter of degree than of an 'either-or'. Given that women's (or at least mothers') family responsibilities easily restrict their ability to gain full economic independence solely via work, their de-familialization, as many studies have shown, depends uniquely on the welfare state. In Chapter 4 I shall demonstrate that welfare state variations in terms of 'de-familialization' are as great as for de-commodification. The Nordic welfare states remain the only ones where social policy is explicitly designed to maximize women's economic independence. This distinguishes them sharply from the liberal regimes in that they offer a supplementary or alternative income guarantee to that of the market. The contrast with the conservative approach is even sharper since it actively encourages women's full-time, life-long participation in the labour market by lessening the familial burden. Conservative-Catholic (and Confucian)

46

Varieties of Welfare Capitalism

policy is not averse to 'de-commodifying' the male bread-winner via income guarantees (the 'just wage') because this is a way to strengthen, or at least reproduce, patriarchy and traditional family dependencies: women's economic dependence on the male; and males' social reproduction dependency on the female (Saraceno, 1996; Bettio and Villa, 1995). Minimizing family dependencies implies a radically recast welfare state. Basically, via the de-familialization of welfare responsibilities, the social democratic welfare state helps commodify women (and so lessens the dependence on males) so that it can then de-commodify them. We have now come full circle: a better specification of what the politics of de-commodification imply in different regimes converges with the critique of gender-blindness in much comparative welfare state research. As in my Three Worlds, welfare state regimes were generally too narrowly specified through income maintenance programmes, the duality of state and market, and through the lens of the standard male production worker. Still, as we shall see in the next two chapters, an empirically based reexamination along these lines confirms more than it disconfirms the validity of a simple conservative, liberal, and social democratic regime trichotomy.

4 The Household Economy The 'family' is a societal institution, the bedrock of society, but it is also an actor, a decision-maker. As an institution, it systematically patterns peoples' behaviour, expectations, and incentives. Parallel to the state and the market, it is part of an integrated regulatory infrastructure that defines what is rational and desirable, that facilitates normative compliance and social integration. As an institution, the family forms part of the 'cement of society', to borrow a phrase from Elster (1989). As decision-maker, the family is a 'player' in the daily life of society. What one family decides to do may not make waves throughout society, but if a huge number of families line up behind a certain behaviour they may very well create institutional change, indeed social revolution. There is always the odd husband who abandons wife and children, but this will hardly have major societal repercussions. Massive repercussions will, however, ensue, when most women decide to transform themselves from housewives into workers. As dual-earner households become the new norm, the family as an institution has changed—indeed, society has changed. As modernization theory tells it, households and 'community' were, until the rise of urban industrial society, the pre-eminent providers of welfare (Parsons and Bales, 1955; Goode, 1963). It was this functional vacuum that the welfare state supposedly filled (Wilensky and Lebeaux, 1958). This view remained uncontested in most welfare state research until the 1990s.1 Why did the family languish as an unexamined residual in welfare state research? In the first place, post-war modernization thinking was mainly interested in the general laws of evolutionary motion; less so in the specifics. In its stylized depiction of the great convergent forces of industrialism, we see the seminal demise of the extended family and the affirmation of its latter-day, nuclearized and 'de-functionalized', successor. In this trans-historical process of convergence, the old world of local, stable, and dense networks gives way to complex bureaucracies, anonymous 1 The lack of systematic attention to households is painfully evident in my own Three Worlds of Welfare Capitalism. It starts out by defining welfare regimes as the interaction of state, market, and family and subsequently pays hardly any notice to the latter.

48

Varieties of Welfare Capitalism

markets, and global transactions. People become individualized, intensely mobile, and adaptable; they come to face a barrage of risks that cannot be internalized within the nuclear family. Functional adaptation, as depicted by modernization theory, implied a shift in risk pooling from localistic micro-solidarities to societal institutions such as trade unions, insurance companies, or the welfare state. The parallel to Durkheim's transition from mechanical to organic solidarity is evident. It is not easy to get a solid grip on what, exactly, are the vanishing functions of 'community' and 'family' that these writers cite. The standard depiction of familial change is that its only real remaining functions are emotional integration (the 'haven in a heartless world'), social reproduction, and consumption. Basically, it is no longer a producer. But, is this true? The standard family may no longer be the main unit of production for the market, but it certainly furnishes non-monetarized goods and services. Similarly, little concretely is said about the decline of 'community'. What community? Is the reference to self-help organizations, such as friendly societies and mutualities? Localistic solidarities and charities, such as neighborliness and the Church? Or, perhaps, lingering feudal practices of conventional obligations and noblesse oblige! The political economy paradigm, which so powerfully underpinned welfare state research in the 1980s, did little to resurrect interest in the family. Its analytical lens was fixed on the battle between state and market, and the family received mention only in so far as it was the nucleus of a class constituency or the beneficiary of distributive outcomes and decommodification. True, with the realization that welfare states could not be reduced to a contest between capital and labour, some writers discovered the impact of Catholicism on European social policy (Wilensky, 1981; van Kersbergen, 1995). Still, this literature also was preoccupied with the political influence of religion, not with the actual welfare role assigned to the family in different welfare states. The family has made a major comeback in recent years. One impulse comes from the burgeoning feminist critique of 'mainstream' malecentred welfare state theory. Even when this critique is predominantly interested in the gender relations that are produced or reproduced by social policy, it inevitably leads us to reconsider the family. Hence, when Orloff (1993) argues that 'de-commodification' inaccurately describes women's relationship to the welfare state, it is because women's work is often unpaid family labour. And, when Hernes (1987) speaks of a 'woman-friendly' welfare state, her yardstick is social policy which enhances women's independence and minimizes the tension between work and family responsibilities. Or, when others identify 'male bread-winner' policy models, the referent is family organization (Shaver and Bradshaw, 1993; Ostner and Lewis, 1995).

The Household Economy

49

Two, the family is now problematized because, in fact, it has become problematic. Where stability and inertia reign, the sociological eye tends to glaze over. Hence, the standard post-war Parsonian nuclear family model invited scarce empirical attention because it appeared so institutionalized. Yet, both family structure and behaviour are now undergoing massive change. Demographers and social scientists are coining concepts such as the 'second demographic revolution' (van de Kaa, 1987), 'postnuclear' or alternative 'atypical' family forms (Oppenheimer and Jensen, 1995). The stable one-earner family is no longer standard but atypical. Cohabitation and single-person households are growing. Childhood today more likely means growing up with parents who both work, or with a single parent. Being a child today also means having few, if any, siblings and a fair risk of seeing one's parents separate or divorce. In the vanguards of change, North America and Scandinavia, the oneearner family became minoritarian already in the 1970s. In 1940, almost 70 per cent of American families were of this type; forty years later they accounted for 28 per cent (Reskin and Padavic, 1994: 145). In Sweden, the employed share of mothers with small children jumped from 38 per cent in 1963 to 82 per cent by 1983 (Hoem, 1995, Table 12.1). Mclanahan et al. (1995, Table 11.3) show that, today, the traditional female housewife role nowhere surpasses 30 per cent. Except in Scandinavia, where stable cohabitation is widespread, the propensity to marry has changed little; what has changed is the permanency of first marriages. In most countries divorce and separation rates have doubled over the past decades (Wagner, 1996). Such turmoil signals an emerging welfare deficit: the family that was the model for post-war welfare state reformers is still the linchpin of policy even if it is becoming extinct. In this chapter I revisit welfare regimes through the analytical lens of the family. Several points will be made. The first is that we should not have taken modernization theory at face value. Even if the long historical wave has, in general, eroded households' role in welfare production, this is perhaps less salient than specific international variations. Some nations are characteristic for their advanced level of 'defamilialization' of welfare responsibilities; others for their sustained adherence to 'familialism'. In other words, some societies may have brought the idealized Parsonian family into being; others reproduce many of the features of the 'pre-industrial' household. Most welfare state theory provides little help in understanding such variation. The real problem begins with the association of the nuclear family with industrialism; it is simply wrong to assume that it lost its welfare functions with the advent of welfare states. The second point is in address to prevailing, often feminist, arguments that models of welfare regimes that have been specified via a political

50

Varieties of Welfare Capitalism

economy perspective fail to hold up when subject to a gendered analysis. Alternative 'gendered' typologies do, in fact, often contradict 'political economy' typologies. But the contradiction may be spurious because different phenomena are being explained and compared. The objective of this chapter is not to debate with gender theories, but to understand the position of the (changing) family in the overall infrastructure of welfare production and consumption. What happens to our political economy models of welfare regimes when we insert the family? What are the effects of family change on welfare states and, ultimately, on postindustrial change? Since household-welfare production is largely—but far from exclusively—based on women's unpaid labour, gender differences in the family-welfare nexus must clearly be addressed. HOUSEHOLDS AND WELFARE PRODUCTION In Politics, Aristotle expressed a politically very uncorrect view when he held that the family is 'an association established by nature for the supply of man's everyday wants'. Modern-day feminists would likely substitute patriarchy for nature; economists, market for family. However that may be, our concern begins with a simple empirical question: to what extent, and under what conditions, does the family still remain a significant association for the supply of 'man's' welfare? There is an abundance of concepts intended to capture the role of families in the welfare mix. Some speak of various 'male bread-winner' models in order to highlight the continued male bias in social policy (Shaver and Bradshaw, 1993; Orloff, 1993; Ostner and Lewis, 1995). Sainsbury (1994) makes a distinction between individual and bread-winner models of social policy. The former approach is more likely to enhance women's autonomy because it gives entitlements that are independent of husbands.2 The 'bread-winner' approach is analytically attractive because the link to welfare state attributes is easy to trace. Employment-, or careerbased entitlement systems, such as social insurance or occupational benefit plans, implicitly favour the male bread-winner. Because women's attachment to paid employment is generally more tenuous, in such systems their social entitlements tend to be derivative of the husband. As a consequence, when marriage becomes less stable, women's access to social protection may suffer—in particular if they are barred from a permanent employment relationship. Thus, single-mother families, or women with interrupted careers, will easily find themselves in a welfare gap (Gornick et al., 1997). Individualized benefit systems—especially if they 2

For an excellent and thorough review of this vast literature, see O'Connor (1996).

The Household Economy

51

are citizenship-based—are more likely to grant women some modicum of economic independence. This is particularly the case if transfers are coupled to affordable child care. It hardly comes as a surprise that singlemother families in the Nordic countries display high activity and low poverty rates (McFate et al., 1995). The bread-winner approach can, and has been, extended to the domain of services and, more generally, to the broader family-benefit package (Bradshaw and Ditch, 1995; Gornick et al., 1997). In this case, what matters is the degree to which social policy frees women from the burden of family obligations; the extent to which motherhood is compatible with careers. A 'male bread-winner' approach presents problems, however. This kind of household was perhaps once dominant, but it no longer is. In some countries, it is close to extinction. To manage this problem, one easily ends up in a classificatory debate. Moreover, 'male bread-winner' typologies are principally of interest if our focus is on gender relations. Since my intent is to examine the degree to which families absorb social risks, I prefer to speak of degrees of 'familialism' or 'de-familialization', as also does Saraceno (1996). De-familialization does not imply 'anti-family'; on the contrary it refers to the degree to which households' welfare and caring responsibilities are relaxed—either via welfare state provision, or via market provision. A familialistic system, again not to be confused with 'pro-family', is one in which public policy assumes—indeed insists—that households must carry the principal responsibility for their members' welfare. A de-familializing regime is one which seeks to unburden the household and diminish individuals' welfare dependence on kinship. The concept of de-familialization parallels the concept of de-commodification; in fact, for women defamilialization is generally a precondition for their capacity to 'commodify themselves' (Orloff, 1993). Hence, de-familialization would indicate the degree to which social policy (or perhaps markets) render women autonomous to become 'commodined', or to set up independent households, in the first place. Familialistic regimes are often influenced by Catholic social teachings and the principle of subsidiarity: limiting public interference to situations where primary social networks—read 'family'—fail (van Kersbergen, 1995). This is why familialism easily goes hand-in-hand with a very passive and undeveloped family policy. As others have noted, it seems paradoxical but active family policies are extraordinarily undeveloped in the most familialistic regimes, such as Italy and Spain (Guerrero and Naldini, 1996; Saraceno, 1996).

52

Varieties of Welfare Capitalism

Measuring the Family-Welfare Nexus How do we empirically measure 'familialism' and 'de-familialization'? It is generally easy to measure governments' role in welfare production and distribution—we know the laws, we can examine programme performance, we can identify who gets what, and the national accounts provide us with a wealth of macro-level information. It is harder to identify welfare in the market, although some systematic evidence is available on private individual or collective occupational insurance. The most difficult part is to measure what goes on behind the family walls. Household self-servicing is not monetarized and hence it fails to appear in most national statistics. Indeed, the architects of modern economic accounting refused to include unpaid family services in national income. In fact, one might even argue that they diminish national income because, if done for free, domestic services 'crowd out' a potential market purchase (Bruyn-Hundt, 1996: 73-4). Time-budget data, although often of uncertain reliability, do allow some estimation of the relative intensity of family self-servicing.3 Indirect measures, such as data on three-generational cohabitation (assuming that co-resident elderly are cared for by their children and vice versa), can also be helpful. Alternatively, familialism may be captured via welfare state (or market) non-provision, such as the inexistence of child care or service provision for the elderly. Such indirect indicators are admittedly ambiguous: two welfare states may be equally service-lean, one because caring is assigned to the family (as in Spain or Italy), the other because it is relegated to the market (as in the USA). The only real solution is to adopt an eclectic methodological approach. A Historical Prelude Historical data tell us that the link between family and welfare state is far less straightforward than depicted in most writings. The standard evolutionary model of a progressive nuclearization of the family in tandem with industrialization appears, first of all, to be simply invalid. Family historians such as Laslett and Wall (1972) or family sociologists such as Barbagli (1988) demonstrate that the timing is wrong: the nuclear family reigned (almost) everywhere already in the seventeenth and eighteenth centuries, that is one or two hundred years prior to modern industrialism. Moreover, it was as dominant in backward regions (such as Sicilia or Calabria) as in advanced centres (London or Paris). It is therefore wrong to assume that the advent of the nuclear family went hand-in-hand with a loss of its wel3 It is also possible—albeit problematic—to monetarize household labour time and estimate its significance within a national accounts framework. For an overview, see Eisner (1988) and Bruyn-Hundt (1996)

The Household Economy

53

fare functions. It is equally false to believe, as many do, that Japan's or Southern Europe's pronounced familialist bias reflects a society of extended families.4 If, then, individual risks and needs could not have been collectivized in extended families, how was pre-industrial social security organized? Of course, we know that pauperism, begging, or vagabondage was widespread. There were charities and almshouses for the poor, guilds and friendly societies for urban artisans, commercial trades, and professionals. Yet, the vast masses were rural, and their livelihood depended not on alms but on family labour, either independently or for landlords and latifundistas. And, rather like today, pre-industrial families were not the epitome of stability. Masnick and Bane (1980) have shown that an American child was as likely to grow up with only one parent in 1870 as in 1970. Even in conservative Spain, the percentage never-married women was lower in the 1970s and 1980s than at the turn of the century (Garrido, 1992: 24). Certainly, the causes of instability have changed. Divorce has replaced death as a leading cause of solo parenthood (except in Spain and Italy); individual choice has replaced compulsion in the case of never-married women. Regardless, the one-earner-plus-housewife family appears to have been an historical exception rather than an institution; a fleeting, midtwentieth-century interlude. Historical portraits show us that the pre-industrial welfare nexus was built on a labour intensive, three-generational social contract. Families were large and their members worked literally non-stop—about twice as much as today. Take the early time-budget data (1930) furnished by Barbagli (op. cit) for an agricultural worker family (husband, wife, one daughter (age 20), one son (age 14) in the province of Milano. In unison, they worked 13,500 annual hours of which paid work was less than half (6,430); unpaid home work was a full 7,080 hours. The mother's 4,380 annual hours were exclusively devoted to unpaid domestic duties, and the daughter helped with an additional 2,700 hours. This compares unfavourably with the father's 2,500 paid hours and zero domestic hours. It compares even more unfavourably with today. In the 1990s, an average wage-earner puts in 1,800 annual paid hours; an average housewife about 2,300.5 Lebergott (1984, Table 38.1) arrives at an almost identical estimate for American women in 1900 (84 weekly, or 4,368 annual hours). 4 Indeed, as Barbagli (1988) shows, Tuscany (the cradle of the Renaissance and a relatively rich and advanced region) is the one and only Italian region in which the extended family remained important. The real reason had mainly to do with the mode of agricultural production (family-based and labour intensive). 5 Household technologies and out-of-home servicing have contributed to a drastic decline in average unpaid domestic work. Today the average Italian housewife spends 2,340 annual hours on domestic activities; her employed equivalent 1,820 hours (which is virtually identical to the average American woman) (Chiesi, 1993; own calculations from Bonke, 1995). Note, however,

54

Varieties of Welfare Capitalism

Until recently, it was the norm that aged parents would reside with their children. Laslett and Wall (1972) suggest that 30-40 per cent of aged Britons in the eighteenth century lived with their offspring; Barbagli (op. cit) estimates that this was the case for 60 per cent of aged Italians in the nineteenth century (here we must remember that life expectancy increased). As late as the 1950s, between one-third and one-half of the elderly cohabited with their children in Finland, Norway, the UK, and the USA. In Japan, a very familialistic society, the rate was 80 per cent (OECD, 1994c, Table 13). This, of course, reflected a two-way generational interchange of welfare: the young would receive the house and, perhaps, a helping hand in caring for infants: the old were secured meals and care when needed. Contemporary Household- Welfare Production

Welfare state writings often wrongly assume that families' welfare responsibilities were effectively displaced with the advent of the modern welfare state. But if we take a closer look at post-war decades, the assumption is essentially incorrect for all countries. If, instead, the reference is to the mature welfare state of today, it still remains incorrect for most countries. Granted, the spread of national health care helped reduce the burden on families to care for their sick members. Still, the post-war welfare state was largely an income-transfer system, only marginally dedicated to family servicing. In fact, Lord Beveridge and other builders of the post-war welfare state explicitly assumed that mothers would be housewives. Even where a more progressive family policy was pursued, as with the Myrdals in Sweden, it took decades before it was translated into practice—at least as far as services were concerned. The commitment of all post-war welfare states was narrowly confined to health care and income maintenance: via money transfers, social policy helped defray part of the additional costs of having children or aged to care for. And the benefit, being typically delivered to the male householder, could hardly be interpreted as an implicit housewife wage. Post-war welfare states did not absorb the family caring burden. Nor were income supplements to families particularly generous. Due to lack of system maturation and to the rather modest level of benefits, the post-war welfare state (say in the 1950s) nowhere guaranteed pension adequacy and therewith widespread economic independence among the aged (Myles, 1984; Palme, 1990). Neither were child benefits especially luxurithat such comparisons need to be qualified. For one, it is well established that housewives' unpaid hours exceed the necessary labour time by far. There is also alternative evidence which suggests that full-time housewives work far less than employed men in terms of aggregate annual hours (Hakim, 1997: 48-52).

The Household Economy

55

ous—with the notable exception of pro-natalist France (Gauthier, 1996; Wennemo, 1994). The first nations to undertake a major expansion of family services—in particular child care, residential homes, or home help for the aged—were Denmark and Sweden (beginning in the late 1960s), followed by Norway and Finland, Belgium, and France (beginning in the 1970s). As of today, these remain the only welfare states meaningfully committed to a de-familialization of servicing burdens. True, a host of nations have a long tradition of pre-school kindergartens (maternelles) for the 3-6-year olds. In Belgium, France, Germany, Italy, Spain (and, again, Scandinavia) coverage is close to universal. The service, however, often remains limited to mornings or a few days a week (again, except in Scandinavia). Put differently, most welfare states are still income transfer biased, and only a handful pursue a de facto reduction of the family's welfare burden. Of course, household technologies enhance domestic labour productivity. Fewer children and, not to forget, the recently acquired economic independence of the aged, imply that the relative weight of caring has declined dramatically over the past half-century. And higher incomes, perhaps supplemented by transfers, should enhance families' capacity to purchase care and services in the market—a purchased or subsidized 'defamilialization', so to speak. But, as we shall discover, the market for household servicing does not thrive easily. Moreover, where the principle of subsidiarity reigns there is little encouragement of de-familialization via subsidies. This may be one reason why family benefits are so surprisingly meagre in Catholic Southern Europe. Service-lean welfare states are not necessarily transfer-generous to families. The Market Alternative

Markets only rarely substitute for public services or family self-servicing. In the past, of course, well-off families could hire nannies and domestic servants because they were cheap. One hundred years ago, 30 per cent of American working women were domestic servants (United States Department of Commerce, 1976, Part I, D 182-232) and, in Italy, most affluent families had one or two domestics (Barbagli, op. cit: 230-1). Moving forward into the industrial era, the market for family welfare remained quite buoyant. Census data from around 1930 indicate that between one-fourth and one-third of all working women were employed as household servants. Be it in aristocratic Britain or in egalitarian Denmark, domestic servants accounted for 12-13 per cent of the labour force and for 30, and 38 per cent of female employment respectively (calculated from ILO, 1943). The decline of this market coincides with the rise of the postwar male bread-winner family. By 1960, domestic servants accounted for

56

Varieties of Welfare Capitalism

2-3 per cent of the labour force in most countries; by the 1980s they had virtually disappeared (Elfring, 1988).6 In their place have emerged blackmarket labour (typically immigrants) and the service economy. Households' capacity to compensate with market purchase depends on three important factors. The first is the famous Engel's Law, according to which rising real household income allows the margin available for nonessential consumption to increase. Yet, this effect may be cancelled out by a second factor: the relative price of services. The gist of Baumol's (1967) cost-disease problem is that long-term service productivity will lag behind goods production. Many services, like hairdressing, psychoanalysis, childminding, teaching, or massage, are inherently incapable of raising productivity by much. You cannot teach or massage quicker without a quality loss. The problem lies in wage relativities. If hairdressers' earnings were to follow relative productivity, they would in the long haul end up indigent. The service would most likely vanish on the supply side. If, alternatively, their earnings follow pace with those in highly productive sectors, their service may price itself out of the market—the service would vanish on the demand side. A very similar effect results from a high tax wedge, which implies that the net, post-tax cost of hiring one person (say, a childminder) begins to approach the net earnings of, say, the mother. In either case, it does not pay to substitute market services for family self-servicing. The 'cost-disease' or 'tax-wedge' problem differs substantially across the advanced nations, mainly because of earnings profiles and the burden of fixed labour costs. Where the tax on labour is high and the wage structure rather egalitarian (as in most European economies), the relative cost of labour-intensive personal and social services is high. The result is limited demand. Where, instead, there is a large pool of low-wage workers (such as in the United States), labour-intensive and cost-sensitive market services become affordable. This is why the labour force in personal services is small (and shrinking) across Europe (typically 5-7 per cent) while, in the United States it is large (12 per cent) and stable (Elfring, 1988, Table V.3). The cheaper the service, such as daycare or laundering, the greater the opportunity cost to families of doing unpaid domestic work, such as washing and ironing. Unless subsidized, the high cost of market services in Europe compels families to self-servicing. Since this easily inhibits women's careers, an alternative consequence is delayed and low fertility— the opportunity cost of having children—becomes, for women, very high. Where servicing is cheaper, the market can 'work'. In the United States, public (and employer) child-care provision is essentially nil. But since the 6 At least according to official statistics. There is no doubt that a large amount of domestic labourers continue to exist in the informal economy.

The Household Economy

57

cost of (low-end) private care is about 6 per cent of average family income, it is affordable to the 'middle class'.7 This may explain why supply seems to grow (but not perfectly) with demand: the number of child-care workers has doubled since 1980, surpassing half a million in 1994 (Reskin and Padavic, 1994: 153; Monthly Labor Review (August, 1995, Table 2). As always, the problem with markets is that they 'fail' for the most needy. Hence, the cost of private child care would amount to 23 per cent of income in poor households—who are especially pressed to maximize labour supply. The predictable result is a caring gap. More than 10 per cent of American children with employed mothers are left alone (Reskin and Padavic, op. cit). This brings us to a third, fundamental factor. If households are rational decision-makers, their marginal propensity to purchase either 'fun' or 'chore' services, restaurants or cleaning, will certainly depend on the balance of income and cost (affordability) but it will also depend on time constraints (need). A hallmark of new, emerging family forms is that they suffer from a scarcity of time. As the conventional family disappears so does the supply of unpaid domestic labour; the new 'atypical' families, be they single-person or dual-earner households, may be income-rich but they also crave services because they lack time.8 Time, Work, and Services in the Household Economy Following the pioneering work of Gershuny (1978; 1991) and, more recently, Bonke (1995,1996) the servicing problem of families can be measured through time-budget data. If we begin with a general comparison across nations, there is a clear negative correlation between female employment rates and women's unpaid hours of domestic work. Where most women are employed, as in Denmark, Finland, the United States, and Canada, unpaid weekly hours are relatively low (less than 25 per week in Denmark, 30-5 hours in Canada, Britain, Sweden, and the USA); where they are not, women tend to work long domestic hours (39 in the Netherlands, 45 in Italy and Spain).9 The statistical relationship is almost perfectly linear. Roughly speaking, each per cent increase in female 7

Prices vary widely with quality and region. Licensed, full-day quality care for under-threes will normally cost $850-1000 a month. At 40 per cent of average production worker earnings, this is clearly beyond reach of most 'middle-class' families. The '6 per cent' average cited above reflects the fact that most American families make use of cheap informal care from unlicensed women. 8 This argument, it will be recognized, is very similar to Staffan Linder's (1970) paradox of the harried leisure class. 9 The high Italian figures reflects the fact that the share of employed women remains modest. Among employed Italian women, however, the weekly unpaid hours approximate the Danes (28 hours).

58

Varieties of Welfare Capitalism

employment translates into a half-hour reduction in weekly domestic work. The intensity of the trade-off depends on several factors: number and age of children, whether mothers work part-time or full-time, and whether husbands help. As Gershuny's (1991) data show, having a child under age 5 produces a 17-30 per cent increase in women's unpaid working time. A recent German study shows that mothers with a child under 3 spend yet an additional 30 per cent, or a total of 8.5 hours daily, in unpaid work (Bundesministerium fur Familie, 1996, Table 5.4). French data show that having children increases unpaid work by roughly 50 per cent, but the effect is, surprisingly, rather invariant whether there are one, two, or three children (Roy, 1984, Fig. 1). Clearly, this implies severe constraints on how much paid employment is possible.10 One possible family strategy would be to augment husbands' involvement in domestic chores to compensate for wives' lack of time. If this actually did happen, the correlation would have been substantially weaker. But the male-substitution effect is not impressive. True, as (working) wives' domestic hours have declined over the years, men's domestic hours have increased somewhat—but hardly enough to compensate (Bonke, 1996; Bruyn-Hundt, 1996; Hakim, 1997). The German study (op. cit), like the British, shows that fathers of small children contribute an hour of care-giving a day; the French arrive at roughly two hours. The lack of an immediate substitution effect comes out more dramatically in crossnational comparisons. Take the extremes of female unpaid labour: at one end Spain and Italy, where women's unpaid hours average about 45 per week; at the other end the United States and Denmark, where women's unpaid hours are, respectively, 31 and 25. Regardless, male's unpaid hours are almost identical in all four countries: 9-10 in Italy and Spain, 12 in Denmark, and 14 in the USA.11 Lamentable as this may be, it is perfectly consistent with a standard neoclassical joint-decision model of household behaviour (Becker, 1981). Since males' earnings power is typically greater, the family as a whole would lose more if it were to reduce paid male hours for the benefit of domestic work. In fact, Sweden is the only country where men's domestic labour input (at 21 hours a week) is substantial. The tempting explanation is that Swedish female-male earnings differentials are unusually narrow. 10 Recent British data bring this out. Child care accounts for 10 per cent (19 hours) of housewives' time but only 1 per cent (1 hour) of fully occupied males' time (Hakim, 1997: 52). u The lack of a male-substitution effect is also evident from Gershuuy's data. Only in Sweden (21 hours) do men appear to approximate female domestic-duty time. Japan is a unique outlier. Women's average domestic hours (33) are similar to Canada and Sweden; men's, however, run to a total of only 2.6 per week. Since the reliability of time-budget data—especially for crossnational comparison—is rather uncertain, these figures should be read with a grain of salt. Yet, they probably do portray national rankings quite well.

The Household Economy

59

In any case, where neither market nor the welfare state offer an affordable or adequate alternative, households are compelled to produce their own personal and social welfare. And, if not even the family is capable of this, the result is very easily lack of welfare. It is probably true, as Hakim (1997) argues, that housewives' unpaid domestic work is more time-consuming than is necessary. Everywhere, employed wives put in much fewer domestic hours, especially when they work full-time.12 Full-time employed women put in a low of 16 unpaid weekly hours in Denmark, about 20-5 hours in Britain, Canada, Norway, and the United States, and 25-30 hours in Italy and France (INSEE, 1990). It is now widely recognized that the compatibility of family obligations with paid female employment is vastly enhanced by access to care services (Gustafsson, 1995). This emerges also in the regression analyses shown in Table 4.1. As the results indicate, daycare is crucial for women's employment; males' contribution to domestic work makes no difference.13 When we omit daycare from our model, the negative effect of women's unpaid labour time is stronger (B = -1.2 rather than -.88), but its impact none the less pales against the daycare variable. Considering how daycare is measured, the results suggest that if a country—like Germany, the Netherlands, Italy, or Spain—were to increase the supply of daycare from present levels to a 20 per cent coverage (like France), the female employment gain would be in the neighbourhood of 10 percentage points! Similarly, were a country like Belgium or France to double their daycare coverage to Danish levels, also they could expect a 10 percentage point growth in female employment. Husbands' domestic hours would have to increase phenomenally in order to achieve similar results.14 Clearly, then, mothers' employment prospects (and the family economy) would be better served by daycare than by encouraging fathers to put in more unpaid hours. Policies that advocate more male participation within the household may appear egalitarian from a gender point of view, but they do not appear to be a 'win-win' strategy. Most households, we can 12 Part-time employment, in fact, does not diminish domestic hours by much (except in the Netherlands). Compared to housewives, the reduction is in the order of 2-3 hours per week (INSEE, 1990, Fig. 1). 13 The simple bivariate correlation between men's and women's unpaid domestic hours is predictably negative, but insignificant (-.12). 14 The analyses in Table 4.1 are based on pooled time and cross-section country-means data on domestic hours, daycare coverage, and female employment rates. The daycare variable has been coded the following way: